Revenues associated with maintenance, repair and service contracts  are recognized when the services are performed. Expenses related  to these types of services are recognized as incurred. the technical merits of the position. The tax benefits recognized in  the financial statements from such a position should be measured  based on the largest benefit that has a greater than 50% likelihood  of being realized upon ultimate settlement. Accounting literature  also provides guidance on derecognition of income tax assets and  liabilities, classification of current and deferred income tax assets  and liabilities, accounting for interest and penalties associated with  tax positions, and income tax disclosures. Judgment is required in  assessing the future tax consequences of events that have been  recognized in our financial statements or tax returns. Variations in the  actual outcome of these future tax consequences could materially  impact our financial statements. We provide for estimated warranty costs at the time of sale  based upon historical rates applicable to individual product lines.  In addition, specific provisions are made when the costs of such  warranties are expected to exceed accruals. Our standard terms  and conditions of sale include a warranty for parts and service for  the earlier of 18 months from the date of shipment or 12 months  from the date of initial operations. Occasionally projects require  warranty terms that are longer than our standard terms due to the  nature of the project. Extended warranty terms may be negotiated  and included in our contracts. We use past experience and historical  claims to determine the estimated liability. Actual results could differ  from our estimate. Warranties Revenue Recognition Our revenues are primarily generated from engineering and  manufacturing of custom products under long-term contracts  that may last from one month to several years, depending on the  contract. Revenues from long-term contracts are recognized on  the percentage-of-completion method of accounting. Occasionally  a contract may require that we segment the project into specific  deliverables for revenue recognition. Segmenting a contract may  result in different interim rates of profitability for each scope of  service than if we had recognized revenue on a combined basis. Research and development costs are charged to expense as  incurred. Such amounts were $8.5 million, $7.7 million and  $7.5 million in Fiscal 2013, 2012 and 2011, respectively. Research and Development Expense Foreign Currency Translation Under the percentage-of-completion method of accounting,  revenues are recognized as work is performed. The estimated  completion to date is calculated by multiplying the total contract  price by the percentage of performance to date, which is based on  total costs or total labor dollars incurred to date compared to the total  estimated costs or total labor dollars estimated at completion. The  method used to determine the percentage of completion is typically  the cost method, unless the labor method is a more accurate  method of measuring the progress of the project. Application of  the percentage-of-completion method of accounting requires the  use of estimates of costs to be incurred for the performance of the  contract. Contract costs include all direct material costs, direct labor  costs and those indirect costs related to contract performance, such  as indirect labor, supplies, tools, repairs and all costs associated  with operation of equipment. The cost estimation process is based  upon the professional knowledge and experience of our engineers,  project managers and financial professionals. Factors that are  considered in estimating the work to be completed and ultimate  contract recovery include the availability and productivity of labor,  the nature and complexity of the work to be performed, the effect of  change orders, the availability of materials, the effect of any delays  on our project performance and the recoverability of any claims.  Changes in job performance, job conditions, estimated profitability  and final contract settlements, including our estimate of liquidated  damages, if any, may result in revisions to costs and income, with  their effects being recognized in the period in which the revisions  are determined. Whenever revisions of estimated contract costs  and contract values indicate that the contract costs will exceed  estimated revenues, thus creating a loss, a provision for the total  estimated loss is recorded in that period. In August 2012, the Securities and Exchange Commission (SEC)  adopted a rule mandated by the Wall Street Reform and Consumer  Protection Act to require companies to publicly disclose their use  From time to time, new accounting pronouncements are issued by  the Financial Accounting Standards Board (the FASB), which are  adopted by us as of the specified effective date. Unless otherwise  discussed, management believes that the impact of recently issued  standards, which are not yet effective, will not have a material impact  on our consolidated statements upon adoption. We measure stock-based compensation cost at the grant date  based on the fair value of the award. Compensation expense is  recognized over the period during which the employee is required  to provide service in exchange for the awards, typically the  vesting period. Excess income tax benefits related to share-based  compensation expense that must be recognized directly in equity  are considered financing rather than operating cash flow activities. New Accounting Standards Stock-Based Compensation The functional currency for our foreign subsidiaries is the local  currency in which the entity is located. The financial statements of  all subsidiaries with a functional currency other than the U.S. Dollar  have been translated into U.S. Dollars. All assets and liabilities of  foreign operations are translated into U.S. Dollars using year-end  exchange rates, and all revenues and expenses are translated at  average rates during the respective period. The U.S. Dollar results  that arise from such translation, as well as exchange gains and  losses on intercompany balances of a long-term investment nature,  are included in the cumulative currency translation adjustments in  accumulated other comprehensive income in stockholders’ equity. 30