Hubbell Policies

ALLOWANCE FOR DOUBTFUL ACCOUNTS POLICY

English

Owner : Vice President, Controller

Last Review: 2023.03.31

FIN - 02

Department: Finance

POLICY

This Policy requires that a business maintain reserves for uncollectable accounts receivable and to ensure that the allowance for Doubtful Accounts is stated at management’s best estimate of the amount of accounts receivable that will not be paid by customers. To meet this objective each business is required to comply with this Allowance for Doubtful Accounts Policy and only with written approval from the Corporate Controllers office, shall be allowed an exemption from any of its procedures.

SCOPE

This Policy applies to all customer accounts receivables.

PURPOSE

The purpose of this Policy is to set the standard for preparation of an allowance for doubtful accounts calculation, minimum quarterly control procedures, balance sheet reconciliation documentation requirements, and electronic audit evidence requirements.

PROCEDURE

This Policy outlines the requirements for calculating and recording allowances for Doubtful Accounts.

An allowance for Doubtful Accounts is required for all customer accounts for which the collectability remains uncertain. The company approved methodology for calculating the allowance for Doubtful Accounts is as follows:

• A/R balances (excluding credits) aged less than 180 days must be reserved at 0.287%; • A/R balances (excluding credits) aged over 180 days must be reserved at 25%; and • A/R balances (excluding credits) aged over 365 days must be reserved at 100%.

In addition to the standard calculations noted above, each business unit must review their open accounts receivable portfolio to determine if any additional collection concerns exist (above those captured through the standard calculation above). These specific identification reserves should be separately captured and detailed out with sufficient explanation in the Allowance for Doubtful Accounts Template. The allowance for Doubtful Accounts calculation should be based upon data at the end of the 2nd month of the quarter (February, May, August and November). Any adjustment required to this reserve must be booked in the 3rd month of the quarter (March, June, September and December). In the event a significant customer collectability issue arises in the 3rd month of the quarter, this issue should be factored into the specific identification portion of the template and should include an explanation as to why it was included. The allowance for Doubtful Accounts should be recorded in OneStream account 1390 (equivalent SAP Account 129000). In addition, adjustments related to this reserve must be reflected in OneStream Custom 3 Account E5730 “Bad Debt Expense” (equivalent SAP Account 650085). Local general ledger account numbers may vary depending on ERP and the business unit controller is responsible to ensure the local general ledger accounts selected will properly

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