Hubbell Policies

CREDIT MEMO AND SALES ALLOWANCE RESERVES POLICY

English

Owner : Vice President, Controller

Last Review: 2017.08.15

FIN - 15

Department: Finance

POLICY

This policy requires all busine ss units to use the company’s approved methodology and template for estimating reserves for credit memos, allowances, and special pricing arrangements. Any modifications as described in the Procedure section require approval from the Corporate Controller’s office.

SCOPE

This policy applies to all Hubbell business units.

PURPOSE

The objective is to ensure compliance with United States Generally Accepted Accounting Principles (GAAP) and ensure appropriate accounting and reporting for credit memos, allowances, and special pricing arrangements across all Hubbell business units.

PROCEDURE

This procedure outlines the requirements for calculating and recording reserves for credit memos and allowances as well as special pricing arrangements (collectively referred to as CM’s).

All business units are required to record a reserve against gross sales revenue and accounts receivable for CM’s offered to customers. The reserve for CM’s must be updated each month using the Credit Memo and Sales Allowances Reserve Template, which is the company’s approved methodology for calculating the reserve. Any departure from the approved methodology (either by use of a different methodology or modification to the Credit Memo and Sales Allowances Reserve Template) must be approved by the Corporate Controller’s office. A link to the Credit Memo and Sales Allowances Reserve Template can be found in the Related Documents section of this procedure. The reserve for credit memos and allowances (and any related reserve adjustments) should be recorded in HFM accounts 1392 and 3160, which are the respective balance sheet and income statement accounts for credit memos and allowances (the applicable SAP accounts are 129200 and 440025, respectively). 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 non-standard allowances or special pricing arrangements and factor them into the reserve calculation. Any modifications to the calculation for significant non-standard allowances or special pricing arrangements must be approved by the Corporate Controller’s office. Additionally business units are responsible for aging open deductions and ensuring they are being cleared on a timely basis (typically within 90 days of the point of sale). In the event there is a significant deterioration in the aging of open deductions, an additional reserve may be necessary. Any modifications to the calculation related to the deterioration of the open deductions aging must also be approved by the Corporate Controller’s office .

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