Segment Reporting

Question 0

disclosure of segment liabilities

GAAP vs IFRS

Answer 0

GAAP, not required

IFRS, required if measure is regularly provided to chief operating decision maker

Question 1

segment reporting

Answer 1

provides information on business activities and economic environment of company’s: performance, prospects of net FCF, and enterprise as a whole

applies to public companies only

Question 2

required disclosures for public enterprises

Answer 2

operating segments (annual and interim)
products and services
geographic areas
major customers

Question 3

accounting principle used

Answer 3

principles used in preparing F/S should be used for segment reporting
reconciled to related aggregate amounts in F/S

Question 4

inter-company transactions

Answer 4

NOT eliminated for reporting

Question 5

operating segment
(definition)

Answer 5

own revenues/expenses
operating results are regularly reviewed
traceable financial info is available

Question 6

corporate headquarters

Answer 6

NOT an operating segment

Question 7

pension plan

Answer 7

NOT an operating segment

Question 8

reportable segment

Answer 8

operating segments that meet the criteria for separate reporting

Question 9

materiality tests for reportable segment

Answer 9

10% “size” test (must meet only one)

75% “reporting sufficiency” test

Question 10

10% “size” test

Answer 10

if reportable segment is 10%+ of ALL operating segments for:

• revenue (internal/external)
• reported profit/loss
• assets

Question 11

75% “reporting sufficiency” test

Answer 11

to be considered as a reportable segment, included operating segments must make up at least 75% of all EXTERNAL revenue

practical limit is 10 segments, but is not precise.

Question 12

“all other segments” category

Answer 12

other business activities and operating segments that are not reportable based on materiality test

Question 13

comparative reporting

Answer 13

if operating segment is reportable in previous period but not the current period, it can still be reportable if management judges segment to have continuing significance

if reportable for current period but not previous period, restate prior periods to reflect new reportable segment

Question 14

segment profit/loss

Answer 14

revenues (internal and external)
- direct traceable costs
- reasonably allocated costs (by CFO)
= operating profit/loss (EBIT)

Question 15

items EXCLUDED from segment profit/loss

Answer 15

general corporate revenues/expenses
interest expense
income taxes
gains/losses from discontinued operations
extraordinary items, etc.

Question 16

reportable segment disclosures

Answer 16

identifying factors
products/services
profit/loss
assets, liabilities (IFRS only)
measurement criteria
reconciliations

Question 17

enterprise-wide disclosures

Answer 17

products/services
geographic areas (revenues, long-lived assets)
major customers (10% or more)