FAR-F2-M4-Segment Reporting

Question 1

Does segment reporting apply to non-public companies?

Answer 1

No. Segment reporting ONLY APPLIES to public companies.

Question 2

What qualifies as an operating segment?

Answer 2

An operating segment is a component of a company that
1. Earns revenues and incurs expenses
2. Operating results are regularly received by Chief Operating Decision Maker
3. Discrete financial information is available.

Question 3

What are some examples of an operating segment?

Answer 3

Management may report results by product lines, service lines or geographic region. All qualify as operating segments. Corporate headquarters and pension plans do not qualify as operating segments.

Question 4

What quantitative threshold for identifying reportable segments is used and how is it applied?

Answer 4

The 10 % size test is used on
1. Reported revenue (includes sales to unaffiliated customers and intersegment sales) greater than or equal to 10% of combined revenue (internal and external) of all operating segments. Disregard any mention of eliminations.

2. Reported profit/loss greater than or equal to 10% of the GREATER (absolute value) of
   A - combined profit of all operating segments who did not report a loss.
   B - combined reported loss of all operating segments that did report a loss.
   **either A or B. Cannot be both.

Basically this means that segments with operating losses are not combined with those having operating profits in determining a segment.

3. Assets greater than or equal to 10% of the combined assets of all operating segments.

Question 5

Is the following statement true or false? “Income and expenses are not allocated to a segment unless they are included in the determination of segment profit or loss reported to the Chief Operating Decision Maker”.

Answer 5

True. Income and expenses are not allocated to a segment unless they are included in the determination of segment profit or loss reported to the Chief Operating Decision Maker.

Question 6

What are the reportable segment disclosures?

Answer 6

The following must be disclosed

1. Products and services
2. Profit or loss
3. Assets

Question 7

An entity that generates 10% or more of it revenue from sales to a single customer must disclose that fact and?

Answer 7

An entity that generates 10% or more of its revenue from sales to a single customer must disclose that fact, the total amount of revenues from each such customer and the identify of the segment or segments reporting the revenues. The identify of the major customers need not be disclosed.