Hubbell Policies

• The parties to the contract have approved the contract and are committed to perform their respective obligations o Note – In practice, this typically occurs when a customer PO has been received that references quoted or otherwise authorized pricing and an employee or other agent of the seller has communicated acknowledgment of the order to the customer. The timing of posting the order in the seller’s ERP system is irrelevant. • Hubbell can identify each party’s rights regarding the goods or services to be transferred • Hubbell can identify the payment terms for the goods or services to be transferred • The contract has commercial substance (that is the risk, timing, or amount of Hubbell’s future cash flows is expected to change as a result of the contract) • It is probable that Hubbell will collect substantially all of the consideration to which it will be entitled to When considering whether collectability of an amount of consideration is probable, Hubbell shall consider the customer’s ability and intention to pay that amount of consideration when it is due. Once a contract meets the above criteria, Hubbell shall not reassess those criteria unless there is a significant change in facts and circumstances (i.e. a significant deterioration in customer’s ability to pay leads Hubbell to believe it is no longer probable that Hubbell will collect consideration for the remaining goods or services to be transferred to the customer). The updated assessment is prospective only, and does not impact goods or services previously transferred to the customer. When considering whether it is probable to collect substantially all of the consideration it is entitled to, Hubbell should consider the following: • Payment terms – in some contracts, payment terms will limit exposure to credit risk as the customer may be required to pay a portion of consideration prior to Hubbell transferring the promised goods or services. • The ability to stop transferring promised goods or services – Hubbell can limit its exposure to credit risk if it has the ability to stop transferring additional goods or services if the customer fails to pay consideration when it’s due.

If a business has doubts regarding the collectability criteria, the Corporate Controller’s Office should be contacted for additional consideration.

Identifying the Customer

In deciding whether a contract is within the scope of ASC 606, Hubbell must consider what role each counterparty holds within the contract. In some contracts, such as multi-party arrangements (i.e. arrangements with distributors), it can be difficult to identify the customer. In these more complex arrangements the counterparty with whom Hubbell initially contracts with may not be the customer. When a contract has been identified as being a multi-party arrangement the following indicators included in ASC 606-10-55-39 should be evaluated to determine which party transfers control of the product or service • Is another party primarily responsible for fulfilling the contract? • Does the entity have inventory risk (or does not have the ability to direct the use and obtain the benefit of the inventory)? • Does the entity does not have discretion in establishing prices? • Is the exposed to credit risk?

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