Through fiscal 2018, in accordance with our historical accounting policies for revenue recognition, we recognized revenue upon transfer of title and risk of loss, or in the case of toll processing revenue, upon delivery of the goods, provided persuasive evidence of an arrangement existed, pricing was fixed or determinable and collectability was reasonably assured. Through charges to net sales, provisions were made for returns and allowances, customer rebates and sales discounts based on past experiences, specific agreements, and anticipated levels of customer activity.

On June 1, 2018, we adopted new accounting guidance that replaces most existing revenue recognition accounting guidance under U.S. GAAP, Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606) (“Topic 606”). The new accounting guidance was adopted using the modified retrospective approach as applied to customer contracts that were not complete at the date of adoption, with the cumulative effect recognized in retained earnings. Comparative financial information for reporting periods beginning prior to June 1, 2018, has not been restated and continues to be reported under the previous accounting guidance. The cumulative effect adjustment resulted from a change in the pattern of recognition for our toll processing revenue stream and certain contracts within the oil & gas equipment revenue stream, which previously were accounted for as point in time and now will be accounted for over time.

The following table outlines the cumulative effect of adopting the new revenue recognition guidance:

(in thousands)	May 31, 2018 (As Reported)		Cumulative Effect of Topic 606 Adoption			June 1, 2018 (As Adjusted)
Consolidated Balance Sheet
Assets
Receivables	$	572,689	$	4,706		$	577,395
Total inventories		454,027		(3,452	)		450,575
Prepaid expenses and other current assets		60,134		944			61,078
Liabilities and equity
Deferred income taxes, net		60,188		454			60,642
Retained earnings		637,757		1,174			638,931
Noncontrolling interests		117,606		570			118,176

Under the new accounting guidance, we recognize revenue upon transfer of control of promised goods or services to customers in an amount that reflects the consideration we expect to receive for those goods or services, including any variable consideration.

Returns and allowances are used to record estimates of returns or other allowances resulting from quality, delivery, discounts or other issues and are estimated based on historical trends and current market conditions, with the offset to net sales. The returns and allowances account increased approximately $546,000 during fiscal 2019 to $6,745,000.

Shipping and handling costs charged to customers are treated as fulfillment activities and are recorded in both net sales and cost of goods sold at the time control is transferred to the customer. Due to the short-term nature of our contracts with customers, we have elected to apply the practical expedients under Topic 606 to: (1) expense as incurred, incremental costs of obtaining a contract; and (2) not adjust the consideration for the effects of a significant financing component for contracts with an original expected duration of one year or less. When we satisfy (or partially satisfy) a performance obligation, prior to being able to invoice the customer, we recognize an unbilled receivable when the right to consideration is unconditional and a contract asset when the right to consideration is conditional. Unbilled receivables and contract assets are included in receivables and prepaid and other current assets, respectively, on the consolidated balance sheets. Additionally, we do not maintain contract liability balances, as performance obligations are satisfied prior to customer payment for product. Payments from customers are generally due within 30 to 60 days of invoicing, which generally occurs upon shipment or delivery of the goods.

Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that we collect from a customer, are excluded from revenue.

Certain contracts with customers include warranties associated with the delivered goods or services. These warranties are not considered to be separate performance obligations, and accordingly, we record an estimated liability for potential warranty costs as the goods or services are transferred.

With the exception of the toll processing revenue stream and certain contracts within the oil & gas equipment revenue stream, we recognize revenue at the point in time the performance obligation is satisfied and control of the product is transferred to the customer upon shipment or delivery. Generally, we receive and acknowledge purchase orders from our customers, which define the quantity, pricing, payment and other applicable terms and conditions. In some cases, we receive a blanket purchase order from our customers, which includes pricing, payment and other terms and conditions, with quantities defined at the time each customer subsequently issues periodic releases against the blanket purchase order.

For the toll processing revenue stream and certain contracts within the oil & gas equipment revenue stream, we recognize revenue over time. Revenue is primarily measured using the cost-to-cost method, which we believe best depicts the transfer of control to the customer. Under the cost-to-cost method, the extent of progress towards completion is measured based on the ratio of actual costs incurred to the total estimated costs expected upon satisfying the identified performance obligation. Revenues are recorded proportionally as costs are incurred. We have elected to not disclose the value of unsatisfied performance obligations for contracts with an original expected duration of one year or less.

Certain contracts contain variable consideration, which is not constrained, and primarily include estimated sales returns, customer rebates, and sales discounts which are recorded on an expected value basis. These estimates are based on historical returns, analysis of credit memo data and other known factors. We account for rebates by recording reductions to revenue for rebates in the same period the related revenue is recorded. The amount of these reductions is based upon the terms agreed to with the customer. We do not exercise significant judgments in determining the timing of satisfaction of performance obligations or the transaction price.

The following table summarizes net sales by product class and by timing of revenue recognition for the fiscal year ended May 31, 2019:

(in thousands)	Reportable Segments
Product class:	Steel Processing		Pressure Cylinders		Engineered Cabs		Other		Total
Steel Processing
Direct	$	2,308,756	$	-	$	-	$	-	$	2,308,756
Toll		127,062		-		-		-		127,062
Pressure Cylinders
Industrial products		-		627,053		-		-		627,053
Consumer products		-		470,447		-		-		470,447
Oil & gas equipment		-		110,298		-		-		110,298
Engineered Cabs		-		-		115,902		-		115,902
Other		-		-		-		38		38
Total	$	2,435,818	$	1,207,798	$	115,902	$	38	$	3,759,556
Timing of revenue recognition:
Goods transferred at a point in time	$	2,308,756	$	1,132,639	$	115,902	$	38	$	3,557,335
Goods and services transferred over time		127,062		75,159		-		-		202,221
Total	$	2,435,818	$	1,207,798	$	115,902	$	38	$	3,759,556

The following tables show the adjustments that would be required to be made to our fiscal 2019 consolidated financial statements to reflect the balances that would have been recorded if we continued to follow our accounting policies under the previous revenue recognition guidance:

(in thousands)	As Currently Reported		Topic 606 Adjustments			Balances Without Adoption of Topic 606
Consolidated Balance Sheet
Assets
Receivables	$	501,944	$	(5,367	)	$	496,577
Total inventories		484,280		8,704			492,984
Prepaid expenses and other current assets		69,508		(6,891	)		62,617
Income tax receivable		10,894		425			11,319
Liabilities and equity
Income taxes payable		1,164		12			1,176
Deferred income taxes, net		74,102		(360	)		73,742
Shareholders' equity - controlling interest		831,246		(2,227	)		829,019
Noncontrolling interests		117,148		(554	)		116,594
Consolidated Statement of Earnings
Net sales	$	3,759,556	$	(6,608	)	$	3,752,948
Cost of goods sold		3,279,601		(5,253	)		3,274,348
Income tax expense		43,183		(319	)		42,864
Net earnings		163,273		(1,036	)		162,237
Net earnings attributable to noncontrolling interests		9,818		16			9,834
Net earnings attributable to controlling interest		153,455		(1,052	)		152,403