Segment Reporting - 20C

Question 1

Disclosure about segments is only required when?

Answer 1

When a company is publicly traded

Question 2

What is the management approach to breaking a company up into segments?

Answer 2

1. Earn revenue and expenses
2. Chief decision maker reviews operating results for resource allocation and performance
3. Financial information is already available

Question 3

What are the types of segments?

Answer 3

1. Cost Centers - Only have expenses (not an operating segment because there is no revenue)
2. Profit Centers - Have revenues & expenses
3. Investment Centers - Revenues, expenses, & substantial investments in PPE

Question 4

What are the thresholds for an operating segment?

Answer 4

10% or more of:

1. Combined Revenue OR
2. the greater of Absolute Value of Combined Profit/Loss; OR
3. Combined Assets

Question 5

What is the 75% test, and how is applied?

Answer 5

The 75% Test is a test to ensure that 75% of total Sales or Revenue is made up of unaffiliated segment revenue.

Segment consolidated sales (or revenue) reported from Combined Revenue, Combined Profit/Loss, & Combined Assets must be greater than 75% of the total consolidated revenue

Must use unaffiliated revenue

If the 75% test is not met, pick up the next biggest segment by consolidated sales to bump over the 75%

Question 6

What are other terms for Consolidated Revenue?

Answer 6

Unaffiliated or External

Question 7

When is a company allowed to report using the aggregate of the reporting segments?

Answer 7

1. To do so would be consistent with the standard
2. The segments must have similar characteristics AND
   3a. Before performing 10% tests, the segments are similar in all of the following: OR
   3b. After performing 10% tests, they don’t meet any of the tests, but are similar in a majority of the following:
   
   • Nature of products & services
   • Nature of production bases
   • Methods used to distribute products or provide services
   • If applicable, nature of the regulatory environment
   • Type of customer

Question 8

How may management segment their company?

Answer 8

1. Products or services
2. Geography
3. Legal Entity
4. Type of Customer

Question 9

What is reported for each operating segment?

Answer 9

1. Revenues
2. Expenses
3. Profits
4. Asset & equity method investments
5. Unusual or extraordinary items

Question 10

What general information must be disclosed?

Answer 10

1. Factors used to ID the reportable segments
2. Types of products & services for each segment
3. Reconciliations for Revenue, P/L, & Assets

Question 11

What geographic area information must be disclosed?

Answer 11

1. External revenues, domestic & foreign
2. Assets & expenditures for assets, domestic & foreign
3. Reconciliation for revenue & assets

Question 12

What major customer information must be disclosed?

Answer 12

1. 10% or more of consolidated revenue
2. U.S. or foreign government
3. Reconciliation for revenue

Question 13

What is consolidated revenue?

Answer 13

Revenue that is found on the the consolidated financial statements

Question 14

The 75% test uses what?

Answer 14

Consolidated (unaffiliated) Sales

IFRS uses Consolidated Revenue

Question 15

Disclosing Major Customers is based off what?

Answer 15

Consolidated (unaffiliated) Revenue

Question 16

Chief Operating Decision Maker describes what?

Answer 16

A specific function, but not necessarily a title of an individual position

Question 17

Major customer data should be disclosed if?

Answer 17

Total sales to one specific customer is greater than 10% of Total Revenues

Question 18

Under IFRS, what are the three threshholds for determining if an operating segment is a reportable segment?

Answer 18

1. The segment revenue is 10% or more of combined revenue of all segments
2. The aboslute value of the segment profit or loss is 10% or more than the greater of the a)combined reported profit of all segments not reporting a loss or b)combined reported loss of all segments reporting a loss
3. The segment assets are 10% or more of the combined assets of all segments

Question 19

Does ASC Topic 280 apply to Not for Profit or Nonpublic Enterprises?

Answer 19

No

Question 20

What is the approach used to determine what information to report for bisiness segments?

Answer 20

Management Approach