Hubbell Policies

• Month-end date of the data used in the analysis (e.g. Aging of inventory is as of January, April, etc.).

• Definition of both Excess Inventory and Obsolete Inventory (e.g. Obsolete Inventory is defined in accordance with the Policy definition and is identified in the analysis as any item with a Status Code of 90 in SAP), and, the product lifecycle timing to support the buckets being used for aging purposes. • Basis of calculation which includes sufficient details for an independent Accountant to perform the calculation. The details should include information on where the data is coming from, how the business obtained comfort of the completeness and accuracy of the data (e.g. Reconciled total per Power BI (PBI) back to SAP and randomly selected a sample of items to tie usage back to SAP), how the calculation is being performed (e.g. Inventory defined as Excess over 1 year is reserved at 25%, Excess between 1-2 years is reserved at 50%, etc.), who outside of Accounting assisted with the review, etc. • A listing of the Components of the E&O reserve calculation (see below section 1) which includes a discussion on the process to document and monitor exceptions to the calculated reserve model (aka Management Overrides).

• A listing of the minimum quarterly control procedure requirements (see below section 2).

• A listing of how the unit adheres to the Electronic Audit Evidence requirements (see below section 3).

All inventories identified or marked as obsolete require a reserve for the full amount of the inventory on the books (expect where an expected scrap value exists, in which case, please see Section 2(4)(c) for additional requirements). Inventory defined as Excess Inventory must be reserved for in accordance with the business unit’s defined reserve requirements as documented in the quarterly analysis.

• If the business unit has inventory on the GL and there is no E&O reserve, documentation must be kept to explain why no reserve is required.

(1) Components of the E&O reserve calculation, at a minimum must include:

A. A complete list by SKU of gross inventory as of the end of month 1 of the quarter. B. A historical usage field – ideally a 3-year average usage (a shorter time period is acceptable however the reasons for the shorter time period should be documented by Business Unit (BU) management, for example, new parts, shorter product life cycle, etc.) and consistently applied. C. An aging of the inventory by year, in general Hubbell anticipates a five year product life cycle with a graduated excess reserve calculation which follows the following schedule:

i. 0 to 2 years – no reserve required; ii. Over 2 year to 3 years – 25% reserve; iii. Over 3 years to 4 years – 50% reserve; iv. Over 4 years to 5 years – 75% reserve; and v. Over 5 years – 100% reserve.

--- Note the determination of the appropriate number of years for a product ’ s life cycle can vary based on the nature of the product, if a longer product life cycle exists these buckets may be increased / shifted with the prior written agreement of the VP, Corporate Controller. To obtain this agreement the BU Controller must submit a

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