1. What is an operating segment? An operating segment is a management-approach-based segment. According to GAAP, an operating segment is a component of an enterprise that engages in business activities from which it may earn revenues and incur expenses, including intersegment revenues and expenses; whose operating results are regularly reviewed by the enterprise’s CODM; and for which discrete financial information is available (textbook p. 490).
2. What is a reportable segment according to FASB ASC Topic 280? What criteria are used in determining what operating segments are also reportable segments? A reportable segment is an operating segment that meets materiality thresholds. One of the following criteria must be met in order for the …show more content…
Describe the 10% revenue test for determining reportable segments. Under the 10% revenue test, the segment’s total revenues (both external and intersegment) are compared with all the operating segments’ total revenue (both external and intersegment), and if it equals or exceeds 10%, then it is a reportable segment (textbook p. 491).
7. Assume that an enterprise has ten operating segments. Of these, five segments qualify as reportable segments by passing one of the 10% tests. However, their combined revenues from sales to unaffiliated customers total only 70% of the combined unaffiliated revenues from all operating segments. Should the remaining five operating segments be aggregated and shown as an “other segments” category? Explain.
No, because if the combined external revenues of the reportable segments is less than 75% of the combined external revenues from all operating segments, then additional segments must be identified as reportable segments until the 75% revenue test is met. Either one or more of the five operating segments that were not reportable must be identified as reportable segments, or some of those segments, if they meet the aggregation criteria, must be aggregated to meet the 10% criteria (textbook p. …show more content…
When is an enterprise required to include information in its financial statements about its foreign and domestic operations? An enterprise is required to include information in its financial statements about its foreign and domestic operations if it is segmented on a geographic basis. In this case, complete segment information would be supplied by country of operation. If it is not segmented on a geographic basis, and instead segmented on another basis, then limited geographic information would be supplied. Revenues and long-lived assets by country of domicile and by all other foreign countries in total must be disclosed. Additionally, separate disclosures must be made for any country that has material revenues or assets (textbook p.
2. What is a reportable segment according to FASB ASC Topic 280? What criteria are used in determining what operating segments are also reportable segments? A reportable segment is an operating segment that meets materiality thresholds. One of the following criteria must be met in order for the …show more content…
Describe the 10% revenue test for determining reportable segments. Under the 10% revenue test, the segment’s total revenues (both external and intersegment) are compared with all the operating segments’ total revenue (both external and intersegment), and if it equals or exceeds 10%, then it is a reportable segment (textbook p. 491).
7. Assume that an enterprise has ten operating segments. Of these, five segments qualify as reportable segments by passing one of the 10% tests. However, their combined revenues from sales to unaffiliated customers total only 70% of the combined unaffiliated revenues from all operating segments. Should the remaining five operating segments be aggregated and shown as an “other segments” category? Explain.
No, because if the combined external revenues of the reportable segments is less than 75% of the combined external revenues from all operating segments, then additional segments must be identified as reportable segments until the 75% revenue test is met. Either one or more of the five operating segments that were not reportable must be identified as reportable segments, or some of those segments, if they meet the aggregation criteria, must be aggregated to meet the 10% criteria (textbook p. …show more content…
When is an enterprise required to include information in its financial statements about its foreign and domestic operations? An enterprise is required to include information in its financial statements about its foreign and domestic operations if it is segmented on a geographic basis. In this case, complete segment information would be supplied by country of operation. If it is not segmented on a geographic basis, and instead segmented on another basis, then limited geographic information would be supplied. Revenues and long-lived assets by country of domicile and by all other foreign countries in total must be disclosed. Additionally, separate disclosures must be made for any country that has material revenues or assets (textbook p.