FAR 21 - SEGMENT REPORTING

Question 1

What method is used in segment reporting to help define what consititues as a “segment”?

Answer 1

The method under ASC 280 is called

Management Approach

Question 2

Reportable Segment > 10%

Three Categories

Answer 2

1. Operations in Different Industries
   
   • Test #1,2,3; Meet any of 3, disclose ALL 3
2. Foreign Operations
   
   • Test #1 & 3; Meet any 1, disclose ALL 3
3. Major Customer or Export Sales
   
   1. Test # 1; Meet, Disclose only 1

Question 3

Three Test for Report Segments

>= 10%

Answer 3

1. Revenue greater than or equal to 10%
   
   • INCLUDES Intercompany sales
2. Operating Profit/Loss >= 10%
   
   • EXCLUDES Corporate level Expenses & Discontinued Operations.
     
     • Interest Cost
     • Income Taxes
3. Segments Asset Test >= 10% Identifiable Assets

Question 4

75% Test

Answer 4

There must be enough segments separately reported so that at least 75% of unaffiliated revenues (to outsiders) is hown by reportable segments. If the 75% test is not satisfied, additional segments must be designated as reportable (even if doesnt meet the 3 tests) until test is satisfied.