Hubbell Policies

In practice, careful consideration should be made regarding the manner in which customer orders with multiple non distinct components are ‘ booked ’ or entered and subsequent ly ‘shipped’ or invoiced in Hubbell’s ERP system. In many cases, combining multiple non- distinct components on a single ‘sales order’ line can help to prevent premature recognition of revenue that should otherwise have been deferred until related components were delivered. Alternatively, invoicing transactions related to these sorts of customer orders should be carefully monitored each reporting period to ensure that manual journal entries are posted in a manner that facilitates proper timing of revenue rec ognition in accordance with Hubbell’s interpretation of ASC -606.

Hubbell Example #3 – Identifying the Performance Obligation – Purchase Order

Background: Hubbell contracts with a customer to sell 100 pieces of three separate SKU’s. The purchase order includes a separate line item and per unit amount for each SKU. Each piece of equipment is not dependent on the other SKU and the customer can utilize each unit separately (i.e. if only 1 unit was delivered the customer can begin using that unit before the other 99 units are delivered). Conclusion: We considered the two criteria to determine whether the services were distinct. Since each SKU and unit is separately detailed in the purchase order each SKU and unit is distinct within the context of the contract. Each unit is also capable of being distinct as the customer can begin using the unit without the other SKU’s and the other units (if a partial shipment is made). As a result, each SKU unit is a separate performance obligation.

Hubbell Example #4 – Identifying the Performance Obligation – Services

Background: Hubbell contracts with a customer to sell a large piece of equipment and to also install the equipment a t the customer’s site. The equipment and installation services are separately priced in the contract (at their stand-alone selling price). There are several other competitors that offer installation services (and customers have used other providers on occasion to install the entities products). Conclusion: We considered the two criteria to determine whether the services were distinct. Since the installation is separately detailed in the contract, the service is distinct within the context of the contract. The installation services are also capable of being distinct as Hubbell does not provide a significant service of integrating the product, does not significantly modify the product and the goods are not highly dependent on the services (which is e videnced by the customer’s ability to use other vendors to install the product). As a result, the installation services and equipment are separate performance obligations.

Options to purchase additional goods or services

Contracts may include options to purchase additional goods or services in the future. Customer options that provide for free or discounted goods or services in the future give rise to a material right, which is a separate performance obligation. Any businesses that provide customer options to purchase additional goods or services at an unusual or significant discount in the future should contact the Corporate Controller’s Office.

Warranties

It is common for Hubbell to provide (in accordance with the contract, the law, or Hubbell’s customary business practices) a warranty in connection with the sale of a product (whether a good or service). The nature of a warranty can vary significantly across industries and contracts. Some warranties provide a customer with assurance that the related product will function as the parties intended because it complies with agreed-upon specifications (assurance type warranties). Other warranties provide the customer with a service in addition to the assurance that the product

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