Segment Reporting

Question 1

Objective

Answer 1

provide information of the business activities and economic environment environment of a company

a) Understand the performance of the enterprise
b) assess its prospects for estimating future net cash flows
c) make more informed judgements about the enterprise

Question 2

Disclosure of segment liabilty

Answer 2

Required by IFRS not GAAP

Question 3

Requirement

Answer 3

ONLY required for all public enterprises information should be revealed about:

a) operating segments annual AND interim
b) products and services
c) geographical segments
d) major customers

Question 4

Accounting reporting method

Answer 4

Same as acc principles like the main financial statements

Question 5

Intercompany transactions

Answer 5

Cannot be eliminated as in consolidations

Question 6

Operating segment

Answer 6

Component that a) activities from which generate their own revenues and expenses

b) its operating results are regularly reviewed by the decision maker or the chief operating officer
c) for which discrete and traceable financial information is available

Question 7

Exceptions

Answer 7

HQ and Pension plans

Question 8

Reportable segment

Answer 8

Operating segments of an enterprise that meet the criteria for separate reporting or quantitative threshold

Question 9

Quantitative threshold

Answer 9

Step 1: 10% size test

Step 2: 75% reporting sufficiency test

Question 10

10% size test: meet ANY

Answer 10

1) 10% or more of internal and external revenue
2) 10% or more of absolute profit or loss
3) 10% or more of combined assets of ALL operating segments

Question 11

75% sufficiency test (even if you meet or dont meet 10% test)

Answer 11

If the total external (consolidated ) revenue reported by the operating segments is less than 75% of external revenue by the entire firm then you need to identify more reporting segments till you reach that 75% threshold
2) practical report is to limit reportable segment number to 10 but it is not a precise limit

Question 12

External revenue

Answer 12

sale to unaffiliated customers

Question 13

Tests order exception

Answer 13

If you meet the 10% then test for 75% and try to hit that goal. of in that process you don’t meet the 10%, thats okay. NEED TO MEET 75% under any circumstances

Question 14

Other segment category

Answer 14

Information about other business activities and operating segments that are nor reportable based on the above criteria are combined AND disclosed in an all other segments category

Question 15

Segment profit or loss

Answer 15

1) Anything included in the calculation of segment profit or loss received by the chief decision maker needs to be disclosed
2) Revenues (internal+external)-directly traceable costs (advertising, selling etc for that segment) - reasonable allocated costs (by the CFO like accounting and legal) gives you operating profit or loss

Question 16

Exclusions from the segment profit or loss

Answer 16

General stuff
interest exp except for a financial institution
income tax
gain or loss from disc operations
minority interest
equity in earnings and losses of an unconsolidated subsidiary