Segment Reporting - 20C Flashcards
Disclosure about segments is only required when?
When a company is publicly traded
What is the management approach to breaking a company up into segments?
- Earn revenue and expenses
- Chief decision maker reviews operating results for resource allocation and performance
- Financial information is already available
What are the types of segments?
- Cost Centers - Only have expenses (not an operating segment because there is no revenue)
- Profit Centers - Have revenues & expenses
- Investment Centers - Revenues, expenses, & substantial investments in PPE
What are the thresholds for an operating segment?
10% or more of:
- Combined Revenue OR
- the greater of Absolute Value of Combined Profit/Loss; OR
- Combined Assets
What is the 75% test, and how is applied?
The 75% Test is a test to ensure that 75% of total Sales or Revenue is made up of unaffiliated segment revenue.
Segment consolidated sales (or revenue) reported from Combined Revenue, Combined Profit/Loss, & Combined Assets must be greater than 75% of the total consolidated revenue
Must use unaffiliated revenue
If the 75% test is not met, pick up the next biggest segment by consolidated sales to bump over the 75%
What are other terms for Consolidated Revenue?
Unaffiliated or External
When is a company allowed to report using the aggregate of the reporting segments?
- To do so would be consistent with the standard
- The segments must have similar characteristics AND
3a. Before performing 10% tests, the segments are similar in all of the following: OR
3b. After performing 10% tests, they don’t meet any of the tests, but are similar in a majority of the following:- Nature of products & services
- Nature of production bases
- Methods used to distribute products or provide services
- If applicable, nature of the regulatory environment
- Type of customer
How may management segment their company?
- Products or services
- Geography
- Legal Entity
- Type of Customer
What is reported for each operating segment?
- Revenues
- Expenses
- Profits
- Asset & equity method investments
- Unusual or extraordinary items
What general information must be disclosed?
- Factors used to ID the reportable segments
- Types of products & services for each segment
- Reconciliations for Revenue, P/L, & Assets
What geographic area information must be disclosed?
- External revenues, domestic & foreign
- Assets & expenditures for assets, domestic & foreign
- Reconciliation for revenue & assets
What major customer information must be disclosed?
- 10% or more of consolidated revenue
- U.S. or foreign government
- Reconciliation for revenue
What is consolidated revenue?
Revenue that is found on the the consolidated financial statements
The 75% test uses what?
Consolidated (unaffiliated) Sales
IFRS uses Consolidated Revenue
Disclosing Major Customers is based off what?
Consolidated (unaffiliated) Revenue
Chief Operating Decision Maker describes what?
A specific function, but not necessarily a title of an individual position
Major customer data should be disclosed if?
Total sales to one specific customer is greater than 10% of Total Revenues
Under IFRS, what are the three threshholds for determining if an operating segment is a reportable segment?
- The segment revenue is 10% or more of combined revenue of all segments
- The aboslute value of the segment profit or loss is 10% or more than the greater of the a)combined reported profit of all segments not reporting a loss or b)combined reported loss of all segments reporting a loss
- The segment assets are 10% or more of the combined assets of all segments
Does ASC Topic 280 apply to Not for Profit or Nonpublic Enterprises?
No
What is the approach used to determine what information to report for bisiness segments?
Management Approach
