FAR 1-6: Segment Reporting Flashcards
Name the 4 required disclosures for segments of an enterprise
- Operating segments
- Products & services
- Geographic areas
- Major customers
Define operating segment
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.”
Name 2 quantitative thresholds used in identifying operating segments
- 10% “size” test
* 75% “reporting sufficiency” test
Describe the 10% test for identifying reporting segments
- 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
What is the 75% test for identifying reporting segments?
- 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
What are the disclosure requirements for reportable operating segments?
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