Segment Reporting

Question 1

When Segment reporting is required?

Answer 1

When

1. Multiple business lines
2. Multiple product lines OR;
3. Multiple geographical areas

Question 2

What are characteristics of a segment?

Answer 2

1. It engages in business activities from which it may earn revenues and incur expenses.
2. Operating results are reviewed by the organization’s chief operating decision-maker (CODM/CEO) AND;
3. Financial Information is available.

Question 3

What is an example o cost center but not Segment?

Answer 3

1. HR departments

2. IT departments

Question 4

What is a test for a segment

Answer 4

1. It must meet the 10% Size test OR

2. 75% Reporting test

Question 5

What is 10% size test

Answer 5

1. Segment revenue is equal to 10% or more of the combined company revenue.
2. 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.
3. The segment assets make up at lease 10% of the total combined assets of all operating segments.

Question 6

What is 75% reporting Sufficiency test

Answer 6

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.

1. Keep adding until achieve 75%
2. Up to 10 reportable segments, when reach 10 determine whether adding more segment is necessary (cost constraints).

Question 7

What are required segment reporting?

Answer 7

1. Offered products and services
2. Geographic areas
3. Largest clients or customers
4. Financial information for the segment.

Question 8

What are the other information to be included in Segment Reproting?

Answer 8

1. Factors used to identify reportable segments
2. The types of products and services sold by each segment.
3. The basis of organization
4. Revenues
5. Interest Expense
6. Depreciation and Amortization
7. Material Expense items
8. Equity method interest in other entities
9. Income tax expense or income
10. Other material non-cash itmes
11. Profit or Loss

Question 9

Revenues from Customers are Included or excluded?

Answer 9

Should be Included

Question 10

Revenues from other segments are Included or excluded?

Answer 10

Should be Included

Question 11

Directly traceable expenses are Included or excluded?

Answer 11

Should be Included

Question 12

Interest Revenues are Included or excluded?

Answer 12

Should be Included

Question 13

Interest Expenses are Included or excluded?

Answer 13

Should be Included

Question 14

Depreciation and Amortization are Included or excluded?

Answer 14

Should be Included

Question 15

Equity in Net Income of Investee (under equity method) are Included or excluded?

Answer 15

Should be Included

Question 16

Significant noncash items are Included or excluded?

Answer 16

Should be Included

Question 17

Income Taxes are Included or excluded?

Answer 17

Should be Excluded

Question 18

General corporate revenues are Included or excluded?

Answer 18

Should be Excluded

Question 19

General corporate expenses are Included or excluded?

Answer 19

Should be Excluded

Question 20

Equity in earnings and losses of an unconsolidated subsidiary is Included or excluded?

Answer 20

Should be Excluded

Question 21

Gains and Losses from discounted operations are Included or excluded?

Answer 21

Should be Excluded

Question 22

Noncontrolling Interest is Included or excluded?

Answer 22

Should be Excluded

Question 23

CLUES to SUCCESS for Segment Reporting?

Answer 23

1. Applying the 10% revenue test
2. Applying the 10% Profit/Loss test
3. Applying the 10% Asset test
4. Applying the 75% sufficiency test
5. Items included/excluded from the segment.