Hubbell Policies

NOT be included in the inventory valuation for U.S. GAAP accounting and reporting purposes. Rather, the difference should be expensed at the time of purchase and charged to the transfer pricing markup expense account within cost of sales. If, for statutory accounting and reporting purposes, the inventory valuation must be maintained on a basis other than as described above, an adjustment to arrive at local GAAP inventory valuation should be made either using SAP special purpose ledger functionality or manually outside of the Hubbell Incorporated U.S. GAAP accounting and reporting structure through local ERP and Onestream. Standard Cost Revisions (Annual Process): Standard cost revisions should be performed on an annual basis that will be effective January 1st and should cover all items in inventory, whether manufactured in-house, acquired from a third-party vendor or from a Hubbell affiliate. Since Hubbell affiliates need the new standard cost for any items they acquire on an inter-company basis in order to complete their standard cost revision, the development of new standard cost for items produced in-house should be completed first each year; with the development of final standard cost (i.e. including items acquired from other Hubbell affiliates) completed in time for such cost to be used in completing the annual cost roll. The actual cost revision of inventory to the new standard cost (i.e., updating frozen standards) must be performed and effective on January 1st. In either case, the effect of the standard cost increase/decrease should be reflected as follows: 1. First-In-First-Out (FIFO) Basis Cost Units – frozen standards take effect January 1st, record impact of standard cost roll into the January balance sheet within the FIFO account (reserve for capitalized variances account). No movements in the capitalized variance account should take place until notification from the Corporate Controller’s group. 2. LIFO Basis Cost Units – frozen standards take effect January 1st, record journal entry into the December balance sheet as part of the year- end LIFO calculation, as per Corporate Controller’s group LIFO guidance . Standard cost should be rolled annually on January 1 st and require the approval of the Business Controller. A standard “Annual Cost Roll Review Package”, Schedule A , is required for all cost rolls and must be part of the Business Unit Controller’s approval process and include, at a minimum, signature of approval from the Business Unit Controller and Segment Controller. All items greater than $100k require approval of the Corporate Controller. Standard Cost Revisions (Mid-Year Process): During the year, certain circumstances may require a correction to an existing frozen standard cost; this should only be done based on the Authority Matrix, and if the revaluation impact is >$500k approval of the Corporate Controller is also required. The “Cost Change Supporting Documentation Form,” Schedule B will be used to support such revaluations. Any business that requires a mid-year standard cost roll due to SAP implementation, acquisition, or otherwise should only be done based on the Segment signature authorization matrix. In addition, any mid-year cost rolls require the approval of the Corporate Controller. Schedule A should be prepared as part of the review and approval process. During the year, costing for new parts is required as part of normal and on-going new part set-up in the system. Costing for new parts is defined as creating a cost for a part that does not, or has not, had any inventory on hand during the year or as of the end of the last fiscal year and was not a part of the last annual cost roll. Any inventory that is classified as pre-production is also defined as a new part. Local business unit process, procedures and approvals should be followed for any new part costing.

Any product or product line moves from one plant to another should use the same standard cost as the current

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