Segment Reporting Flashcards
When Segment reporting is required?
When
- Multiple business lines
- Multiple product lines OR;
- Multiple geographical areas
What are characteristics of a segment?
- It engages in business activities from which it may earn revenues and incur expenses.
- Operating results are reviewed by the organization’s chief operating decision-maker (CODM/CEO) AND;
- Financial Information is available.
What is an example o cost center but not Segment?
- HR departments
2. IT departments
What is a test for a segment
- It must meet the 10% Size test OR
2. 75% Reporting test
What is 10% size test
- Segment revenue is equal to 10% or more of the combined company revenue.
- The segment’s reported “Profit or Loss” is 10% or more of the GREATER of (absolute amount):
- The combined reported loss of all operating segments reported profits or losses. - The segment assets make up at lease 10% of the total combined assets of all operating segments.
What is 75% reporting Sufficiency test
Total consolidated revenue of operating segment report less than 75% of consolidated revenue. Additional Operational segments will need to be reportable segments until at least 75% of revenue is included in reportable segments.
- Keep adding until achieve 75%
- Up to 10 reportable segments, when reach 10 determine whether adding more segment is necessary (cost constraints).
What are required segment reporting?
- Offered products and services
- Geographic areas
- Largest clients or customers
- Financial information for the segment.
What are the other information to be included in Segment Reproting?
- Factors used to identify reportable segments
- The types of products and services sold by each segment.
- The basis of organization
- Revenues
- Interest Expense
- Depreciation and Amortization
- Material Expense items
- Equity method interest in other entities
- Income tax expense or income
- Other material non-cash itmes
- Profit or Loss
Revenues from Customers are Included or excluded?
Should be Included
Revenues from other segments are Included or excluded?
Should be Included
Directly traceable expenses are Included or excluded?
Should be Included
Interest Revenues are Included or excluded?
Should be Included
Interest Expenses are Included or excluded?
Should be Included
Depreciation and Amortization are Included or excluded?
Should be Included
Equity in Net Income of Investee (under equity method) are Included or excluded?
Should be Included