FAR Module 20C

Question 0

T/F

if you qualify for not being required to do segment reporting, you can still choose to do it but then you must follow the accounting rules

Answer 0

TRUE

Question 1

T/F

Segment reporting does not apply to not-for-profit organizations or nonpublic Enterprises

Answer 1

TRUE

Question 2

This is a component of an enterprise engaged in business activity for which it may earn revenue and incur expenses, about which separate financial information is available that is evaluated regularly by the chief operating decision-makers in deciding how to allocate resources and in assessing performance

Answer 2

Operating segment

Question 4

A segment is significant, and therefore reportable, if it satisfies at least one of what three tests?

Answer 4

1) Revenues - segment revenue, including intersegment revenue, is 10% or more of combined segment revenue, including inter-segment revenue
2) Operating Profit/Loss - The absolute amount of segment profit or loss is 10% or more of the greater, in absolute amount, or combined profit of segments reporting profit, or combined loss of segments reporting loss
3) Segment Assets - Segment assets are 10% or more of total segment assets

Question 5

These costs are operating expenses incurred by the enterprise for the benefit of more than one operating segment

Answer 5

Common Costs

Question 6

How should common costs be treated?

Answer 6

These costs should only be allocated to a segment for external reporting purposes if they are included in the measure of the segments profit or loss that is used internally by the chief operating decision maker

Question 7

T/F

Only the assets that are included internally in the measure of the segment’s assets used to make operating decisions shall be reported as assets of the segment in external financial reports

Answer 7

TRUE

Question 8

What are the three criteria in The Management Approach to defining an Operating Segment?

Answer 8

(1) earns revenues and incurs expenses
(2) chief decision maker (example: CEO) reviews operating results for resource allocation and performance
(3) financial information is already available

Question 9

If an operating segment meets the 10% test, it will be reported where?

Answer 9

If an operating segment is reportable it is reported in the footnote disclosures

Question 10

T/F

An operating segment has to meet at least 2 of the 3 10% tests to be reportable

Answer 10

FALSE

It only has to meet 1 of the 3 tests!

Question 11

This revenue includes intercompany transactions

Answer 11

Combined Revenue

Question 12

This revenue excludes intercompany transactions as elimination entries have been made.

Answer 12

Consolidated Revenue

Question 13

Consolidated Revenue is also known as…

Answer 13

Unaffiliated Revenue

Question 14

What is the purpose of the 75% test to report enough of your business?

Answer 14

The segments you report must cover 75% or more of your CONSOLIDATED SALES. (Sales are only a component of revenues, but if you are not given sales, use Consolidated Revenue.)

Keep in mind, 10 Reportable Operating Segments is enough. Any more may get confusing.

Question 15

Aggregating Reportable Operating Segment Information is only allowed in what circumstances?

Answer 15

1) if to do so would be consistent with the standard
2) the segments have similar economic characteristics
3a) Before performing the 10% tests the segments are similar in ALL of the following OR
3b) After performing the 10% tests they do not meet any of the tests but they are similar in a MAJORITY of the following

a) nature of products and services,
b) nature of the production process,
c) methods used to distribute products or provide services,
d) if applicable, nature of the regulatory environment
e) type of customer

Question 16

What should you report for each reportable operating segment?

Answer 16

(1) Revenues (internal, external, interest revenue, equity in earnings of investee);
(2) Expenses (interest expense, depreciation/amortization/depletion, taxes);
(3) Profits;
(4) Assets, expenditures for assets, and equity method investments
(5) Unusual & Extraordinary Items

Question 17

Additional necessary disclosures may include what general information?

Answer 17

1) Factors used to ID the reportable segment
2) Types of products and services for each reportable segment.
3) Reconciliations for revenue, P/L, & other assets

Question 18

Additional necessary disclosures may include what geographic information?

Answer 18

1) External revenues, domestic & foreign
2) Assets & expenditures for assets, domestic & foreign
3) Reconciliations for revenue & assets

Question 19

Additional necessary disclosures may include what regarding major customers?

Answer 19

1) Must meet 10% test: 10% or more of Consolidated Revenue
2) Affected segment and the revenues for major customers. Not required to disclose the customer, unless U.S. or foreign government.
3) Reconciliation for revenue

Question 20

T/F

The method used for reporting segment information is the asset-liability approach

Answer 20

FALSE

It is the Management Approach

Question 21

T/F

If management judges that an operating segment is reportable in year 1 and is of continuing significance, information about that segment should be reported in year 2 even if it does not meet the requirements for reportability in year 2

Answer 21

TRUE

Question 22

T/F

An enterprise must report separate information about an operating segment if its assets are 10% or more of the combined assets of all operating segments

Answer 22

TRUE

This is the 3rd 10% test

Question 23

T/F

An enterprise must report separately the costs and expenses incurred by each segment

Answer 23

FALSE

You only have to report this for reportable segments, not for each segment

Question 24

T/F

One of the requirements of segment reporting is to report cash flows for each reportable segment

Answer 24

FALSE

Question 25

T/F

An enterprise must report the interest revenue for each reportable segment if this information is normally reviewed by the chief operating decision maker

Answer 25

TRUE