The cumulative effect of initially applying the new revenue standard under ASC Topic 606 was recorded as an adjustment to the opening balance of retained earnings, which impacted the condensed consolidated balance sheet as follows:

($ in thousands)	August 31, 2018		ASC Topic 606 Adjustments			September 1, 2018
Assets
Inventories, net	$	79,233	$	(942	)	$	78,291
Other current assets		7,204		1,651			8,855

Liabilities and Stockholders' Equity
Other current liabilities	$	46,935	$	14		$	46,949
Deferred income tax liabilities		1,083		163			1,246
Retained earnings		484,886		532			485,418

The adoption of ASC Topic 606 had the following impact on the condensed consolidated balance sheet and condensed consolidated statement of operations for the three months and six months ended February 28, 2019:

($ in thousands)	As Reported		ASC Topic 606 Adjustments			Balance without adoption of ASC Topic 606
Assets
Inventories, net	$	99,984	$	3,734		$	103,718
Other current assets		18,196		(1,157	)		17,039

Liabilities and Stockholders' Equity
Other current liabilities	$	44,825	$	5,503		$	50,328
Retained earnings		477,027		(2,926	)		474,101

	Three months ended									Six months ended
	February 28, 2019									February 28, 2019
($ in thousands)	As Reported			ASC Topic 606 Adjustments			Balance without adoption of ASC Topic 606			As Reported			ASC Topic 606 Adjustments			Balance without adoption of ASC Topic 606
Statement of Earnings
Operating revenues	$	109,182		$	(178	)	$	109,004		$	221,133		$	(6,346	)	$	214,787
Operating income		(4,460	)		(111	)		(4,571	)		(2,420	)		(3,391	)		(5,811	)

The Company determines the appropriate revenue recognition for its contracts by analyzing the type, terms and conditions of each contract or arrangement with a customer. Revenue is recognized when the Company satisfies the performance obligation by transferring control over goods or services to a customer. The amount of revenue recognized is measured as the consideration the Company expects to receive in exchange for those goods or services pursuant to a contract with the customer. The Company does not recognize revenue in cases where collectability is not probable, and defers the recognition until collection is probable or payment is received. Sales taxes, value added taxes, and other taxes collected from its customers concurrent with its revenue activities are excluded from revenue.

The Company elected to use the practical expedient of treating shipping and handling costs associated with outbound freight as a fulfillment obligation instead of a separate performance obligation. Shipping and handling fees billed to the customer are reported as revenue and recorded in the same period as the associated fulfillment costs.

Customer rebates, cash discounts and other sales incentives are recorded as a reduction of revenues in the period in which the sale is recognized. The Company establishes provisions for estimated warranties and does not generally sell extended warranties for its products.

In addition, the Company elected to use the practical expedient of not disclosing the value of unsatisfied performance obligations at the end of the period when the contract has an original expected length of service of one year or less. For contracts with a length longer than twelve months, the unsatisfied performance obligations were $1.7 million at February 28, 2019.

Performance Obligations

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied.

For contracts with multiple performance obligations, the Company allocates the transaction price to each performance obligation using the stand-alone selling price of each distinct good or service in the contract. For most performance obligations, the stand-alone selling price is directly observable as these goods or services are also sold separately by the Company. For performance obligations where the stand-alone selling price is not directly observable, the Company uses the expected cost plus a margin approach, under which the expected costs of satisfying a performance obligation are forecasted and then an appropriate margin for that distinct good or service is added.

The Company’s performance obligations are satisfied at either a point in time or over time depending on the measure of progress applied toward the complete satisfaction in the transfer of control of the related goods and services to the customer.

Revenue recognized at a point in time is derived from the sale of equipment and related parts. Revenue recognition for equipment and parts is generally at a point in time upon transfer of control of the goods to the customer which generally happens upon shipment of goods to the customer.

Revenue recognized over time is primarily derived from engineering services and remote monitoring subscription services as well as custom and contract manufactured products. For engineering services, transfer of control to the customer is continuous over time. Therefore, revenue is recognized based on the extent of progress towards completion of the performance obligation. Judgment is required when selecting the method to measure progress towards completion. For fixed price agreements, the Company recognizes revenue on an inputs basis, using total costs incurred to date as a percentage of total costs expected to be incurred. For time and material arrangements, the Company utilizes an output method of resources consumed such as the expended hours times the hourly billing rate. For remote monitoring subscription services, customers are generally billed in advance and revenue is recognized ratably over the life of the agreement.

For custom and contract manufactured products, the transfer of control is continuous over the life of the agreement and products do not have an alternate use to the Company. When the customer agreements contain contractual termination clauses and right to payment for work performed to date, the revenue from these agreements is recognized over time as the products are produced.

The Company also leases certain infrastructure property to customers. Revenues from the leasing of infrastructure property are recognized on a straight-line basis over the lease term.

A breakout by segment of revenue recognized over time versus point in time for the three months and six months ended February 28, 2019 is as follows:

	Three months ended						Six months ended
	February 28, 2019						February 28, 2019
($ in thousands)	Irrigation		Infrastructure		Total		Irrigation		Infrastructure		Total
Point in time	$	85,939	$	10,917	$	96,856	$	167,025	$	32,164	$	199,189
Over time		9,827		1,292		11,119		16,351		2,782		19,133
Revenue from the contracts with customers		95,766		12,209		107,975		183,376		34,946		218,322

Lease revenue		—		1,207		1,207		—		2,811		2,811
Total operating revenues	$	95,766	$	13,416	$	109,182	$	183,376	$	37,757	$	221,133

Further disaggregation of revenue is disclosed in the Note 15 – Industry Segment Information.

Contract Balances

Contract assets arise when recorded revenue for a contract exceeds the amounts billed under the terms of such contract. Contract liabilities arise when billed amounts exceed revenue recorded. Amounts are billable to customers upon various measures of performance, including achievement of certain milestones and completion of specified units of completion of the contract.

Contract assets primarily relate to the Company’s rights to consideration for work completed but not billed at the reporting date. The contract liabilities primarily relate to the advance consideration received from customers for customer contracts, for which transfer of control of products or performance of service occurs in the future, and therefore revenue is recognized upon completion of the performance obligation.

At February 28, 2019, contract assets amounted to $1.5 million. This amount is included in the other current assets line item within current assets on the condensed consolidated balance sheets. The contract asset attributable to the cumulative effect from the adoption of ASC Topic 606 was $1.1 million; the contract asset at August 31, 2018 was $0.5 million.

At February 28, 2019 and August 31, 2018, the contract liability was $8.7 million and $8.2 million, respectively. The contract liability is included in the other current liabilities on the condensed consolidated balance sheets. During the Company’s six months ended February 28, 2019, the Company recognized $6.5 million of revenue that was included in the liability as of August 31, 2018. The revenue recognized was due to applying advance payments received for the performance obligations completed during the quarter. Amounts included here exclude deferred lease revenues that are also included within other current liabilities.