2008 Annual Report - Hubbell Wiring Device-Kellems

Foreign Currency TranslationThe assets and liabilities of international subsidiaries are translated to U.S. dollars at exchange rates in effect atthe end of the year, and income and expense items are translated at average exchange rates in effect during the year.The effects of exchange rate fluctuations on the translated amounts of foreign currency assets and liabilities areincluded as translation adjustments in Accumulated other comprehensive (loss) income within Shareholders’equity. Gains and losses from foreign currency transactions are included in income.Cash and Cash EquivalentsCash equivalents consist of investments with original maturities of three months or less. The carrying value ofcash equivalents approximates fair value because of their short maturities.InvestmentsThe Company defines short-term investments as securities with original maturities of greater than threemonths but less than one year. Investments in debt and equity securities are classified by individual security as eitheravailable-for-sale or held-to-maturity. Municipal bonds and variable rate demand notes are classified as availablefor-saleinvestments and are carried on the balance sheet at fair value with current period adjustments to carryingvalue recorded in Accumulated other comprehensive (loss) income within Shareholders’ equity, net of tax. Othersecurities which the Company has the positive intent and ability to hold to maturity, are classified as held-tomaturityand are carried on the balance sheet at amortized cost. The effects of amortizing these securities arerecorded in current earnings. Realized gains and losses are recorded in income in the period of sale.Accounts Receivable and AllowancesTrade accounts receivable are recorded at the invoiced amount and generally do not bear interest. Theallowance for doubtful accounts is based on an estimated amount of probable credit losses in existing accountsreceivable. The allowance is calculated based upon a combination of historical write-off experience, fixedpercentages applied to aging categories and specific identification based upon a review of past due balancesand problem accounts. The allowance is reviewed on at least a quarterly basis. Account balances are charged offagainst the allowance when it is determined that internal collection efforts should no longer be pursued. TheCompany also maintains a reserve for credit memos, cash discounts and product returns which are principallycalculated based upon historical experience, specific customer agreements, as well as anticipated future trends.InventoriesHUBBELL INCORPORATED AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)Inventories are stated at the lower of cost or market value. The cost of substantially all domestic inventories(approximately 79% of total net inventory value) is determined utilizing the last-in, first-out (LIFO) method ofinventory accounting. The cost of foreign inventories and certain domestic inventories is determined utilizingaverage cost or first-in, first-out (FIFO) methods of inventory accounting.Property, Plant, and EquipmentProperty, plant and equipment values are stated at cost less accumulated depreciation. Maintenance and repairexpenditures are charged to expense when incurred. Property, plant and equipment placed in service prior toJanuary 1, 1999 are depreciated over their estimated useful lives, principally using accelerated methods. Assetsplaced in service subsequent to January 1, 1999 are depreciated over their estimated useful lives, using straight-linemethods. Leasehold improvements are amortized over the shorter of their economic lives or the lease term. Gainsand losses arising on the disposal of property, plant and equipment are included in Operating Income in theConsolidated Statement of Income.43