Lockheed Martin Corporation principally researches, designs, develops, manufactures, integrates, operates and sustains advanced technology systems and products, and provides a broad range of management, engineering, technical, scientific, logistic and information services within its four business segments: Aeronautics, Electronic Systems, Information Systems & Global Services, and Space Systems. As a result, Lockheed has many long-term contracts. Please review the Notes to Financial Statement (look at the most recent annual report 10-K). Are there any notes that provide a good summary of the concepts associated with revenue recognition and long-term contracts?

Answer the following questions:

1. How does Lockheed measure its percentage of completion on most of its long-term contracts?

2. For the remaining long-term contracts, how does Lockheed recognize revenue and profits?

3. If a change in the contract is made, when is that change reflected in revenues?

4. How does Lockheed normally account for revenue under its service contracts not associated with design, development, or production activities?

5. Is Lockheeds method of accounting for costs incurred under these service contracts the same as its method for recording revenue? Explain.