FAR-Segment Reporting

Question 1

How many tests must be performed to determine if a segment must be separately reported?

Answer 1

There are three tests:
Revenue: Is 10% or more of total revenues

Profit/Loss: Is 10% or more of total combined operating profit

Asset Test: If segment’s assets are 10% or more of firm total assets

Question 2

In addition to the three tests for segment reporting, what additional test must be performed?

Answer 2

75% Test: The aggregate of reportable segments must be equal to at least 75% of of total revenues. If the 75% test is not met after the first 3 tests, then additional segments must be reported.

Question 3

How large does a segment have to be for it to be required to be reportable?

Answer 3

Requires disclosures for segments that make up 10% or more of the business, thus making them a reportable business segment.

Question 4

Do segments include goodwill?

Answer 4

Segments includes assets only (NO GOODWILL)

Question 5

In segment reporting, what is the management approach?

Answer 5

Is when management evaluates a segment by activities such as revenues, expenses, and customers

Question 6

For separately reported segments, what five things are required to be disclosed?

Answer 6

1. Total segment operating profit of loss
2. Amounts of certain I/S items such as operating revenues, depreciation, interest expense, tax expense, and significant non-cash expenses
3. Total segment assets
4. Total capital expenditures
5. Reconciliation of the following items: Revenues, Operating Profit, Assets

Question 7

What is the requirement to disclose supplemental information about major customers?

Answer 7

If revenues from any one customer are more than 10% of total revenue

Question 8

What is the limit for reportable segments?

Answer 8

10 segments has been determined to be the reasonable upper limit for the number of segments that a company must disclose.

Question 9

What tests are performed for segment reporting of operations in different industries?

Answer 9

All tests and disclose all 3.

Question 10

What tests are performed for segment reporting of Foreign Operations?

Answer 10

Revenue test and Asset test. Meet any 1, disclose all 3.

Question 11

What tests are performed for segment reporting of Major customer or export sales?

Answer 11

Revenue test only. If met, then disclose only revenue.

Question 12

Intercompany sales are eliminated for consolidation. How are they treated for segment reporting?

Answer 12

They are included to determine revenues for segment reporting purposes.

Question 13

Are general corporate expenses included in segment expenses?

Answer 13

No. Not unless it is specifically stated that they are to be included. Some questions will ask for ‘common expenses’, but they include indirect operating expects, etc, but not general corporate expenses.

Question 14

Which types of entities are subject to ASC 280 - Segment Reporting?

Answer 14

Only public companies have to report on segments per ASC 280.

Question 15

What are the three tests that determine if a segment is reportable?

Answer 15

A segment is reportable if it contributes at least 10% of the total for segments of one or more of the following

Revenues
Assets
Profits

Question 16

What is the management approach?

Answer 16

A segment that represents any group of activities with revenues and expenses that is regularly evaluated by management as a SINGLE UNIT.

Question 17

What are the tests used for Operations In Different Industries; Foreign Operations; and Major Customers/Export Sales?

Answer 17

Operations In Different Industries: All Tests – Revenue, Profit/Loss, and Assets
Foreign Operations: Revenue, and Assets
Major Customers/Export Sales: Revenue