Description of the Business, Basis of Presentation and Recent Accounting Pronouncements | Note 1—Description of the Business, Basis of Presentation and Recent Accounting Pronouncements Description of the Business CSRA Inc. (“CSRA” or the “Company”), a provider of IT and professional services, delivers IT, mission, and operations-related services across the U.S. government, including to the Department of Defense (“DoD”), Department of Homeland Security (“DHS”), the intelligence community, civil and healthcare agencies, and to state and local government agencies through two business segments: (1) Defense and Intelligence, and (2) Civil. NES Acquisition In May 2017, CSRA executed an agreement for the acquisition of NES Associates, LLC (“NES”), a provider of IT services to the U.S. government, for approximately $105 million in cash, subject to closing adjustments. The transaction closed in July 2017; and NES became a wholly-owned subsidiary of CSRA on the date of closing. The NES acquisition will be reflected in CSRA’s financial statements beginning in the second quarter of fiscal year 2018 using the acquisition method of accounting, with CSRA being considered the accounting acquirer of NES. Due to the recency of the acquisition, the initial purchase accounting for this acquisition was not completed at the time of issuance of these financial statements. CSRA will record the assets acquired and liabilities assumed at their estimated fair value, with the difference between the fair value of the net assets acquired and the purchase consideration reflected as goodwill. See Note 4—Goodwill and Other Intangible Assets for further discussion of the measurement considerations for intangible assets. Basis of Presentation The accompanying unaudited Consolidated and Condensed Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”), and should be read in conjunction with the information contained in the Company’s Annual Report on Form 10-K for the year ended March 31, 2017 . The interim period unaudited Consolidated and Condensed Financial Statements are presented as described below. All intercompany transactions and balances have been eliminated. Certain information and disclosures normally required for annual financial statements have been condensed or omitted pursuant to SEC rules and regulations. In the opinion of management, all adjustments considered necessary for fair presentation of the results of the interim period presented have been included. CSRA reports its results based on a fiscal year convention comprised of four thirteen-week quarters. Every fifth year includes an additional week in the first quarter to prevent the fiscal year from moving from an approximate end of March date. Contract accounting requires significant judgment relative to assessing risks, estimating contract revenue and costs, and making assumptions for schedule and technical issues. Due to the size and nature of many of CSRA’s contracts, developing total revenue and costs at completion estimates requires significant judgment. Contract costs include direct labor and billable expenses, allocation of allowable indirect costs, and warranty obligations. CSRA recognizes revenue and billable expenses from these transactions on a gross basis because it is the primary obligor on contracts with customers. The contracts that required estimates-at-completion (“EACs”) using the percentage-of-completion method were approximately 35% , and 37% of CSRA’s revenues for the three months ended June 30, 2017 , and July 1, 2016 , respectively. CSRA’s income before income taxes and noncontrolling interest for the three months ended June 30, 2017 and July 1, 2016 included the following gross favorable and unfavorable adjustments due to changes in estimated profitability on fixed price contracts accounted for under the percentage-of-completion method. Three Months Ended (Dollars in millions) June 30, 2017 July 1, 2016 Gross favorable $ 18 $ 11 Gross unfavorable (6 ) (8 ) Total net adjustments, before taxes and noncontrolling interests $ 12 $ 3 Unbilled recoverable amounts under contracts in progress do not have an allowance for credit losses and, therefore, any adjustments to these amounts related to credit quality are accounted for as a reduction of revenue. Unbilled amounts under contracts in progress resulting from sales, primarily to the U.S. and other governments, that are expected to be collected after one year totaled $16.8 million and $15.6 million as of June 30, 2017 and March 31, 2017 , respectively. Depreciation expense was $ 37.1 million and $ 32.4 million for the three months ended June 30, 2017 and July 1, 2016 , respectively. Earnings Per Share The computation of diluted earnings per share excludes stock options and restricted stock units, whose effect, if included, would be anti-dilutive. The number of shares related to such stock awards was 398,322 and 2,194,894 for the three months ended June 30, 2017 and July 1, 2016 , respectively. Use of Estimates GAAP requires management to make estimates and assumptions that affect certain amounts reported in the unaudited Consolidated and Condensed Financial Statements and accompanying notes. These estimates are based on management’s best knowledge of historical experience, current events, and other assumptions that management considers reasonable. Actual results could differ from those estimates. Amounts subject to significant judgment and/or estimates include, but are not limited to: determining the fair values of assets acquired and liabilities assumed, derivative instruments and non-financial assets such as internally developed software for internal use; costs to complete fixed-price contracts, certain deferred costs, collectability of receivables, reserves for tax benefits, including valuation allowances on deferred tax assets, loss accruals for litigation, and inputs used for computing share-based compensation. Fair Value Measurements Fair value is the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market in an orderly transaction between marketplace participants. The accounting guidance for fair value measurements establishes a three level hierarchy that prioritizes inputs as follows: Level 1 — Unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 — Quoted prices for similar assets or liabilities or quoted market prices for identical or similar assets in markets that are not active. Level 3 — Valuations derived from techniques where one or more significant inputs are unobservable. Assets and liabilities valued using the fair value measurement guidance on a recurring basis include: pension assets and derivative instruments (consisting of interest rate swap contracts, total return swaps, and foreign currency forward exchange contracts). Pension assets are valued using model based pricing methods that use observable market data; and are, therefore, considered Level 2 inputs. The fair value of interest rate swaps is estimated based on valuation models that use observable interest rate yield curves as inputs. Total return swaps are settled on the last day of every fiscal month. Therefore, the value of any total return swaps outstanding as of any balance sheet date is not material. The inputs used to estimate the fair value of the Company's derivative instruments are classified as Level 2. No significant assets or liabilities are measured at fair value on a recurring basis using significant unobservable (Level 3) inputs. Assets and liabilities measured at fair value on a non-recurring basis include: those acquired in a business combination, equity-method investments, and long-lived assets, which are recognized at fair value if deemed to be impaired or if reclassified as assets held for sale. The fair value in these instances are then determined using Level 3 inputs. The Company’s financial instruments include cash, trade receivables, vendor payables, derivative financial instruments, and debt. As of June 30, 2017 , the carrying value of cash, trade receivables, and vendor payables approximated their fair value. The carrying amounts of the Company’s financial instruments with short-term maturities are deemed to approximate their market values. The carrying amount of the Company’s long-term debt, excluding capital leases, was $ 2.5 billion at both June 30, 2017 and March 31, 2017; and approximated its fair value on those dates based on recent trading activity. The fair value of long-term debt is estimated based on current interest rates offered to the Company for instruments with similar terms and remaining maturities, and are classified as Level 2. There were no transfers between levels of the fair value hierarchy during the three months ended June 30, 2017 or the three months ended July 1, 2016 . Recent Accounting Pronouncements New Accounting Standards During the three months ended June 30, 2017 , CSRA adopted the following Accounting Standard Update (“ASU”): In March 2017, the FASB issued ASU No. 2017-07- Compensation- Retirement Benefits (Topic 715) (“ASU 2017-07”), which changes the presentation of net periodic pension and post-retirement costs. The guidance requires that service costs associated with pension and post-retirement plans be presented in the same financial statement line item as the compensation cost for the related employees. All other net benefit costs must be reported separately from income from operations (if presented). The standard is effective for the first interim period within annual periods beginning after December 15, 2017, with early adoption permitted. Since CSRA’s defined benefit pension and post-retirement plans (the “Plans”) are frozen, historical service costs consist of administrative expenses. CSRA chose to early adopt this standard during the first quarter of the fiscal year ending March 30, 2018. As a result, net benefit costs of the Plans have been presented as a separate line item on the Company’s statements of operations. The prior period has been revised to conform with the current period presentation. Standards Issued But Not Yet Effective The following ASUs were recently issued but have not yet been adopted by CSRA: In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which supersedes the revenue recognition requirements and some cost guidance included in the Accounting Standards Codification (ASC). Upon adoption, ASU 2014-09 will change the way we recognize revenue and significantly expand the disclosure requirements for revenue arrangements. In August 2015, the FASB issued ASU 2015-14, Deferral of the Effective Date , resulting in a one-year deferral of the effective date of the standard. For CSRA, ASU 2014-09 will become effective in the first quarter of fiscal 2019. The new standard may be adopted either retrospectively or on a modified retrospective basis whereby it would be applied to new contracts and existing contracts with remaining performance obligations as of the effective date, with a cumulative catch-up adjustment recorded to the beginning balance of retained earnings at the effective date. The new standard requires us to identify contractual performance obligations and determine when revenue should be recognized. This and other requirements could change the method or timing of revenue recognition for our firm-fixed-price and cost-reimbursable-plus-fee contract portfolio. The Company’s implementation project team completed the initial assessment phase. Their integrated approach to analyzing the standard’s impact on our contract portfolio includes a review of accounting policies and practices, evaluating the effects of the requirements on our contracts and business practices, and assessing the need for system and internal control changes or enhancements. The Company identified likely effects related to the treatment of option years as discrete contracts and the grouping of promised goods and services into performance obligations for the purpose of recognizing revenue under the new standard. As a result, recognized changes in contract estimates may result in either smaller or larger revenue adjustments than before adoption of the ASU. Anticipated losses on contracts will continue to be recognized in the period they are identified. The Company plans to adopt the standard on April 1, 2018; and to implement it using the modified retrospective method, where the cumulative effect is recognized at the date of adoption. The project team has begun work to quantify the effect of adoption on the Company’s financial statements, as well as identify required changes to the Company’s current accounting policies and internal control framework. These activities and the Company’s evaluation of the quantitative effect of adoption will extend into future periods. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”), which supersedes the current guidance related to accounting for leases. The guidance requires lessees to recognize most leases on-balance sheet as a right of use asset and lease liability. ASU 2016-02 also requires expanded qualitative and quantitative disclosures to provide financial statement users with additional information on the amount, timing, and uncertainty of cash flows arising from CSRA leases. The standard must be adopted using the modified retrospective approach; and will be effective for the first interim period within annual periods beginning after December 15, 2019, with early adoption permitted. CSRA is currently evaluating the impact of adoption on its financial statements. In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows: Restricted Cash (Topic 230) (“ASU 2016-18”). This guidance requires the inclusion of restricted cash and restricted cash-equivalent balances in the statement of cash flows. The ASU does not define "restricted cash" and "restricted cash equivalents." The Company will be required to include its restricted cash balance (currently classified within Prepaid and other current assets) in the Cash and cash equivalents balance presented in the statement of cash flows using a retrospective transition method for each period presented. A reconciliation between the statement of financial position and the statement of cash flows must be disclosed when the statement of financial position includes more than one line item for cash, cash equivalents, restricted cash, and restricted cash equivalents. An entity with a material balance of amounts generally described as restricted cash and restricted cash equivalents must also discuss the nature of the restrictions. The standard is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption, including during an interim period, is permitted. The Company has not yet determined an implementation date for this ASU. In January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350) Simplifying the Accounting for Goodwill Impairment (“ASU 2017-04”). Its main provisions are: (a) removing step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation; and (b) eliminating the need to determine the fair value of individual assets and liabilities of a reporting unit to measure goodwill impairment. ASU 2017-04 is effective for all public business entities for fiscal years beginning after December 15, 2019, with early adoption permitted on or after January 1, 2017. The Company tests goodwill for impairment annually on the first day of the second fiscal quarter and on an interim basis if an event occurs, or circumstances change that would “more likely than not” reduce the fair value of a reporting unit below its carrying amount. The Company plans to early adopt ASU 2017-04 on July 1, 2017, which coincides with its annual assessment for the impairment of goodwill. Other recently issued ASUs effective after June 30, 2017 are not expected to have a material effect on CSRA’s financial statements. |