Hubbell Policies

Each indicator should be assessed within the context of the commercial transaction. There is no order in which the indicators should be applied. Professional judgement should be utilized when evaluating the above criteria.

Hubbell Example #1 – Identifying the Customer

Background: Hubbell utilizes third party agents to sell Hubbell products to the end user/customer. Hubbell has an annual sales agent agreement with the agent that includes a stated commission percentage for each sale earned. When conducting a sale, the agent obtains an order from the end user/customer and enters the order directly into Hubbell’s ordering system. The agent never takes control of the inventory and is not exposed to any credit risk in the transaction (as the end user/customer pays Hubbell directly). The agent does not have ability to price the item without the approval of Hubbell.

Conclusion: The end user/customer is the customer in the arrangement, as the agent does not have inventory risk, cannot establish price and is not exposed to the credit risk in the transaction.

Combination of Contracts: In most cases, entities will apply the model to individual contracts with a customer. However ASC 606-10-25-9 requires entities to combine contracts entered into at or near the same time that meet one or more of the following criteria: • The contracts are negotiated as a package with a single commercial objective • The amount of consideration to be paid on one contract depends on the price or performance of another contract • The goods or services promised in the contracts are a single performance obligation in accordance with ASC 606 (refer to section 2.0 Identify the Performance Obligation for further details). An example of contracts that may need to be combined is when Hubbell enters into an equipment contract with a customer and a separate service or extended warranty agreement at or near the same time of the equipment contract.

Contract Modifications:

A contract modification includes any change in an existing contract, such as a change in price or scope of the contract. Oral communications can, depending on context, constitute contract modifications. A contract modification exists only when both parties to the contract approve the modification. The specific terms of the modification could result in a different accounting conclusion (including a cumulative catch-up-adjustment). Contact the Corporate Controller’s Office if you have a contract modification after production of the contract has already begun. Modifications of contracts must always involve the applicable business unit’s VP, Legal.

2.0 Identify the Performance Obligation

At contract inception Hubbell should identify each distinct promise to transfer the customer a good or service as a performance obligation.

In performing this evaluation Hubbell should not only include the promises included in the contract but also promises that are implied by Hubbell’s customary business practices.

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