Hubbell Policies
Revenue Recognition (ASC 606) POLICY
English
Owner : Vice President, Controller
Last Review: 2018.08.20
FIN – 44
Department: Finance
POLICY
This policy requires that a business recognize revenue pursuant to the guidance stated in FASB ASC 606, Revenue from Contracts with Customers. Any deviations from this policy and the related Procedure for Revenue Recognition (including any business-specific accounting policies relating to accounting for revenue) must be pre-approved in writing by the Corporate Controllers Office prior to adoption.
SCOPE
This policy applies to all revenue transactions, including the sale of products, services, licenses and software.
PURPOSE
The purpose of this policy and the related Procedure for Revenue Recognition is to set the standard for when, and what amount of revenue should be recognized for each transaction.
PROCEDURE
This document is Hubbell’s interpretation of ASC 606 – Revenue from Customers Accounting Standards. Based on the principles detailed in this document, a business should recognize revenue to reflect the transfer of goods or services to a customer in an amount that it expects to be entitled to exchange for those goods or services. Any deviations from this procedure or publications or business specific accounting policies relating to accounting for revenue must be pre approved in writing by the Corporate Controllers Office prior to adoption.
In accordance with the core principle of assessing the timing and amount of revenue to recognize, a business should apply the followings steps:
• Identify the Contract with the Customer (see Section 1.0) • Identify the Performance Obligation (see Section 2.0) • Determine the Transaction Price (see Section 3.0) • Allocate the Transaction Price (see Section 4.0) • Recognize the Revenue when the business Satisfies a Performance Obligation (see Section 5.0)
Objective: To ensure revenue is accurately recorded.
Concept:
1.0 Identify the Contract with the Customer
The initial step in the revenue recognition framework is to identify the contract with the customer. A contract can include both written and oral commitments, and includes, without limitation, not just formal executed agreements, but purchase orders and, depending on the nature of the communication, email confirmations and/or requests. For a contract to be accounted for under ASC 606, it must meet all criteria detailed in ASC 606 10-25-1, which includes the following
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