The largest selling segment is claimed by the Aeronautic Business consisting of 32% net sales in 2014. The Information Systems and Global Solutions, Missiles …show more content…
The complexity of contracts offered presents another complication. Contracts differ with regards to receiving payment, including just a few of the options: Cost-reimbursable, fixed-price, incentive-fee, etc. This further complicates Lockheed Martin’s business. The complexity of the various contract types present a reporting challenge, estimation error, and overall risk of material misstatement.
Significant risks and uncertainties lie in designing and developing defense and technology and covering pension liabilities. Failure of new technologies is possible, but some can even cause death that may not be covered with insurance. An ever changing financial liability, pensions are hypersensitive to market changes. Litigation poses another threat possibly resulting in fines, penalties, etc. Operating cycles are mostly long-term alongside numerous contract types, further complicating the recognition of payments. Lockheed Martin accounts for most of their contracts based on the percentage-of-completion method based on the progress of a product and an estimation of the profit when