Hubbell Policies

Cash Discounts

Cash discounts represent variable consideration. The Corporate template for cash discounts reserve utilizes the expected value method to estimate the variable consideration and should be utilized by all businesses that offer cash discounts. Refer to the Procedure for Cash Discount Reserve, which can be found on the Wire. Reserve for Credit Memo and Sales Allowances are offered by the Hubbell Businesses. The programs are designed as incentives for the Electrical Distributors to sell into large markets or to sell to end customers for use in specific projects. The programs often include ship and debit or other special pricing arrangements. These types of discounts/programs represent variable consideration. The Corporate template for credit memo and sales allowances reserve utilizes the expected value method to estimate the variable consideration and should be utilized by all businesses who offer these types of programs. Refer to the Procedure for Credit Memo and Sales Allowance Reserves, which can be found on the Wire. To account for the transfer of products with a right of return, Hubbell should recognize all of the following: -Revenue for the transferred products in the amount of consideration to which Hubbell expects to be entitled (therefore, revenue would not be recognized for the products expected to be returned) -A refund liability -An asset (a corresponding adjustment to cost of sales) for its right to recover products from customers on settling the refund liability The Corporate Controller’s office has created a standard template to calculate the sales returns reserve. The standard template estimates the required reserve using a historical average of returns as a percentage of sales, applied to the number of days outstanding. The template also estimates the right to recover asset. From a balance sheet classification standpoint the refund liability will be recorded within current liabilities and the right to recover asset will be recorded within other assets. Businesses that charge restocking fees should record the restocking fees within Revenues rather than an offset to cost of sales. Consideration payable to a customer includes cash amounts that Hubbell pays, or expects to pay, to the customer (or to other parties that purchase Hubbell’s goods or services from the customer). Consideration payable to a customer also includes credit or other items (for example, a coupon or voucher) that can be applied against amounts owed to Hubbell (or to other parties that purchase Hubbell’s goods or services from the customer). Hubbell shall account for consideration payable to a customer as a reduction of the transaction price and, therefore, of revenue unless the payment to the customer is in exchange for a distinct good or service that the customer transfers to Hubbell. If the consideration payable to a customer includes a variable amount, Hubbell shall estimate the transaction price (including assessing whether the estimate of variable consideration is constrained). Consideration Payable to a Customer Sales Returns Reserve

The following previously issued Corporate templates reflect the variable consideration aspect of ASC 606. Any business not using the following Corporate templates must receive approval from the Corporate Controller’s Office .

-Reserve for Cash Discounts

-Reserve for Credit Memo and Sales Allowances

-Reserve for Returns

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