Hubbell Policies

CASH DISCOUNT RESERVES POLICY

English

Owner : Vice President, Controller

Last Review: 2015.10.30

FIN - 09

Department: Finance

POLICY

This policy outlines the requirements for calculating and recording reserves for cash discounts.

SCOPE

All business units are required to record a reserve against gross sales revenue and accounts receivable for cash discounts offered to customers.

PURPOSE

The purpose of this policy and the related Procedure for Cash Discount Reserves is to set the standard for preparation of a cash discount reserve calculation.

PROCEDURE

This procedure outlines the requirements for calculating and recording reserves for cash discounts.

The reserve for cash discounts must be updated each month using the Cash Discount Template, which is the company’s approved methodology for calculating the reserve for cash discounts. Any departure from the approved methodology (either by use of a different methodology or modification to the Cash Discount Template) must be approved by the Corporate Controller’s office. The reserve for cash discounts should be recorded in HFM accounts 1393 and 3140, which are the respective balance sheet and income statement accounts for cash discounts allowed. 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 map to these HFM accounts. Business units should consider any significant one-time discounts and factor them into the reserve calculation. The calculation calls for an input of the current trade receivables balance to be input into the template. This input should reflect the population of receivables eligible to receive a discount in the given period. Any modifications to the calculation for significant one- time discounts must be approved by the Corporate Controller’s office.

ADMINISTRATION

Roles and Responsibilities. The business unit is responsible for updating the reserve for cash discounts on a monthly basis using the Cash Discount Template (using the model prescribed below) on a monthly basis.

The business unit controller is responsible to identify when terms for cash discounts offered to new customers or modifications of cash discount terms for existing customers that are non-standard (i.e., not consistent with terms generally offered to the existing customers) and to ensure appropriate steps are taken to consider the impact to the reserve for cash discounts.

Monitoring, Evaluation and Review. The group business controller will ensure the reserve for cash discount is reviewed prior to close on a monthly basis.

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