Hubbell Policies

Hubbell transfers control of a good or service over time if one of the following criteria is met:

• The customer simultaneously receives and consumes the benefits provided by Hubbell’s performan ce as Hubbell performs (i.e. certain maintenance/service agreements) • Hubbell’s performance creates or enhances an asset (for example, work in process) that the customer controls as the asset is created or enhanced • Hubbell’s performance does not create an asset with an alternative use to Hubbell, and Hubbell has an enforceable right to payment for performance completed to date An asset created by Hubbell’s performance does not have an alternative use to Hubbell if Hubbell is either restricted contractually from readily directing the asset for another use during the creation or enhancement of that asset, or is limited practically from readily directing the asset in its completed state for another use. In determining whether an asset is limited practically from being able to be readily directed in its completed state for another use, the businesses should consider the amount of lost profit that would be lost in readying the product. Any amount of lost profit greater than 75% would generally suggest no alternative use of the good/product. The right to payment for performance completed to date does not need to be for a fixed amount. However, at all times throughout the duration of the contract, the entity must be entitled to an amount that at least compensates the entity for performance completed to date if the contract is terminated by the customer or another party for reasons other than Hubbell’s failure to perform as promised. In assessing whether there is a right to payment, Hubbell must be able to recover cost plus a reasonable margin during the entirety of the contract. For instance, even if you have a time based cancellation schedule, if during all periods of the contract cost plus a reasonable margin cannot be recouped by Hubbell from the customer, than the right to payment criteria have not been met. Careful consideration should be given to the terms and conditions, specifically around cancellation terms in contracts and Hubbell’s standard terms and conditions. If a businesses’ standard terms and conditions change during a period, if the business contemplates entering into a significant sales agreement that contains a material diversion from its standard terms and conditions, or if Hubbell accepts a customer’s terms and conditions with different cancellation terms, the business unit should contact the Corporate Controller’s Office . In performing the overtime assessment for made-to-order products, it is often better to start with the right to payment assessment prior to the alternative use assessment. If the right to payment assessment is not satisfied Hubbell does not need to perform the alternative use assessment. Generally, Hubbell’s standard terms and conditions d o not establish cost plus a reasonable margin throughout the contract period and thus the right to payment threshold has not been satisfied.

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