Segment Reporting Flashcards
What is the management approach?
Method to determine which segments to report; it’s based on how management organizes the segments internally to make operating decisions and assess performance.
What ways can companies segment their financial statements?
Type of product/service, geographic region, type of customers, by legal entity.
What’s the management approach to defining an operating segment?
- it has revenues and expenses
- the chief operating decision maker reviews operating results for resource allocation and performance
- financial info is available for it
Segment reporting is not required for what entities?
Non-for-profits and nonpublic companies
How to test if you report enough of your business?
Reportable segments must be at least 75% of the business’s consolidated sales (use sales if given instead of revenue, as sales is a component is revenue)
What are the 10% tests to determine whether a segment is reportable?
10% or more of:
1. combined revenue (intercompany sales included)
2. greater of combined profit or loss
3. combined assets
Just need to pass 1 of these threshold tests to be a reportable segment.
What to report for each reportable operating segment?
Revenues, expenses, profits, assets, unusual and extraordinary items
When can you aggregate reportable operating segments?
- similar economic characteristics
- before 10% if it’s similar in all the following (or meets majority after 10% tests): nature of p/s, nature of production process, distribution methods, type of customer.
Additional customer test?
If a customer makes up more than 10% of the consolidated revenue, needs to be disclosed but don’t need to identify the customer.
How is IFRS different for segment reporting?
IFRS is basically same.
For 75% test, they use revenues instead of consolidated sales like US does.
