Segment Reporting Flashcards
With regard to segment reporting, what is the management approach concept in reference to?
Management regularly evaluates a group of associated activities with revenues and expenses as a segment.
What is the threshold for reporting a segment?
It must contribute at least 10% of the total for all segments of one or more of: revenues, assets, and profits
What are some areas that segments may be identified?
By Activity, Product, or Customers
What are the three areas (elements) tested to determine whether a segment should be separately reported?
1) Revenue
2) Profit/Loss
3) Assets
With regard to segment reporting, what is the Revenue test?
If the segment’s revenues are ≥ 10% of Company’s total revenue (to include any intercompany/intersegment sales and transfers)
With regard to segment reporting, what is the Profit/Loss test?
Summarize each of the profits and losses of each of the segments, taking the larger of the two 10% figures to use as the threshold. These will include allocated common (overhead) costs and exclude corporate-level expenses (G and A, interest, etc.)
When performing the Profit/Loss segment reporting test, are Intersegment Sales included?
Yes
When performing the Profit/Loss segment reporting test, are corporate level expenses included?
No
When performing the Profit/Loss segment reporting test, are allocated common (overhead) costs included?
Yes
What is the Asset test?
If the segment’s assets are ≥ 10% of Company’s identifiable assets
What are the types of reportable segments that are subjected to tests?
1) Operations in Different Industries
2) Foreign Operations
3) Major Customers or Export Sales
What are the tests for “Operations” in Different Industries? What are the disclosure requirements?
All three (Revenue, Profit/Loss, Assets). If any of the tests are met, all three must be disclosed.
What are the tests for Foreign Operations (Geographic areas)? What are the disclosure requirements?
Revenue and Asset tests. If either are met, all three must be disclosed.
What are the tests for major customer or export sales?
Revenue test. If met, just disclose segment revenue.
What is the 75% test for segment reporting?
An additional test that must be met, which requires enough segments to be separately reported so that at least 75% of “unaffiliated” (outsider) revenues is shown by reportable segments.
