Hubbell Policies

justification (which includes assumptions / support for the longer cycle) to the respective Business Segment Controller and the VP, Corporate Controller for review/approval.

D. A management approved schedule of items that were excluded from the reserve (aka exclusions).

A list of common exclusions includes: a. New parts – valid for a period of 1-3 years based on the product life cycle from the date the new finished goods product is available for purchase by our customers, or for raw materials the date of first purchase; b. Rework – aged inventory which can be reworked into higher value saleable inventory can be considered if there is an established history of success with this type of activity; c. Commodities – the value of a commodity which is included in an SKU of aged inventory (such as brass, steel, copper, etc.) can reduce the amount of the E&O reserve if there is a demonstrated history of successfully isolating and reselling the commodity to a third party; d. Customer required spare parts; and e. Management determined future demand – the value of firm purchase orders. In no case can an exception of this nature exist for more than twelve months from the date of designation. A. A tie-out of the total on-hand inventory in SAP (or local ERP) by company code to the total on-hand inventory received from PBI or included in the E&O analysis for non-PBI companies. i. This reconciliation should be included in the support file for the E&O reconciliation. ii. In general, our expectation is that variances of 1% or less are the result of timing issues, and anything over the 1% threshold needs to be investigated. B. A listing of new parts (whether in the calculation file or on a separate tab) along with a brief description of i. the logic applied by the unit to this item. ii. Evidence of a regular review of new parts to confirm they are within the window of the current exclusion period from the reserve calculation (time from create-date to current date not longer than exclusion period). C. Overrides / Exceptions I. Ensure there is a listing by company code (or lower level with subtotal at company code level) which documents any management determined exceptions at the SKU level to the standard methodology. Each SKU level exception should include: a) Date the exception was granted (and an aging of how long it has existed); b) Requester of the exception and approver of that request; c) Reason for the exception; and d) Evidence of review each quarter that the exception still is valid (via a review meeting, email confirmation, or some other mechanism). II. In the instance where the exception is granted as a result of the fact that some components are interchangeable in the assembly of final products, on an annual basis, there should be evidence that the finance / accounting team has reviewed this assumption with production to validate. D. For company codes which include multiple product lines i. A summary tab (or in the face of the BlackLine rec) which clearly shows the reserve balance by unit or product line to allow clarity of what is driving the reserve. (2) The minimum quarterly control procedure requirements for each business unit

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