FAR 1-6: Segment Reporting

Question 1

Name the 4 required disclosures for segments of an enterprise

Answer 1

• Operating segments
• Products & services
• Geographic areas
• Major customers

Question 2

Define operating segment

Answer 2

Distinct revenue-producing components of the enterprise about which separate financial information is produced internally, & whose operating results are regularly reviewed by the enterprise. Determined using a “management approach.”

Question 3

Name 2 quantitative thresholds used in identifying operating segments

Answer 3

• 10% “size” test

* 75% “reporting sufficiency” test

Question 4

Describe the 10% test for identifying reporting segments

Answer 4

• Revenue: Reported revenue, including both sales to external customers & intersegment sales or transfers is 10% or more of the combined revenue, internal & external, of all operating segments
• Reported profit or loss: The absolute amount of its reported profit or loss is 10% or more of the greater, in absolute amount, of (1) the combined reported profit of all operating segments that did not report a loss, or (2) the combined reported loss of all operating segments that did report a loss
• Assets: Assets are 10% or more of the combined assets of all operating segments

NOTE: Must meet only 1 of the above

Question 5

What is the 75% test for identifying reporting segments?

Answer 5

• Combined external (consolidated) revenue of all reportable segments must be at least 75% of the total consolidated revenue of the entity
• The practical limit is 10 segments, but not a precise limit

Question 6

What are the disclosure requirements for reportable operating segments?

Answer 6

For each reportable segment, the entity must report:

• Identifying factors
• Products or services
• Profit or loss details
• Asset details
• Liability details (IFRS only)
• Measurement criteria
• Reconciliations