Segment Reporting

Question 1

Management approach

Answer 1

taking the company and dividing it into operating segments.

Question 2

Operating segment

Answer 2

1. Earns revenues and incurs expenses (profit center)
2. Chief decision maker reviews operating results for resource allocation (budget) and performance (performance measures)
3. Financial information is already available

Question 3

10% test to define reportable operating segments

Answer 3

Must meet atleast one of the three:
10% or more of:
1. combined revenue (combined = before the application of eliminating entries in consolidated statements)
2. combined assets
3. the greater of absolute value of combined profit/loss.

Question 4

75% test to report enough of your business

Answer 4

Segments you report (the segments that met atleast one of the 10% rules) must cover 75% or more of your CONSOLIDATED sales. (sales are a component of revenues)
10 reportable operating segments are enough

Question 5

Aggregating reportable operating segment information

Answer 5

Allowed only if:

1. to do so would be consistent with the standar
2. the segments have similar economic characteristics and:
   3a) Before performing 10% test the segments are similar in all of the criteria
   3b) After performing 10% test, they don’t meet any of the tests, but are similar in a majority of the criteria.

Question 6

Major customer

Answer 6

Must be 10% test: 10% or more of CONSOLIDATED revenue

Question 7

What is reported for each reportable operating segment

Answer 7

1. Revenues
2. Expenses
3. Profits
4. Assets, expenditures for assets, and equity method investments
5. Unusual and extraordinary items.

Question 8

Additional disclosures

Answer 8

General information:
Geographical areas
Major customers.