In a consolidation between a parent company and subsidiaries, what must be done to intercompany transactions?
Intercompany transactions are not eliminated for reporting
What type of companies does segment reporting apply to?
Public companies only
Operating segment
Component of an enterprise:
- that engages in business activities
- whose operating results are regularly reviewed by the enterprise’s Chief Operating Decision Maker
- for which discrete financial info is available (traceable CF)
What are not considered to be an operating segment?
- Corporate headquarters
2. Pension plan
What are the 2 materiality tests for reportable segments?
- 10% “size” test
2. 75% “reporting sufficiency” test
10% size test
Reported revenue, profit/loss, or assets are 10% or more of combine revenue, profit/loss, or assets (respectively) of all reporting segments
75% reporting sufficiency test
At least 75% of external (consolidated) revenue is included in reportable segments
If total of external (consolidated) revenue reported by operating segments = less than 75% of consolidated revenue, additional operating segments need to be identified as reportable
Segment profit (or loss) formula
Revenues (segment) - Directly traceable costs - Reasonably allocated costs (by CFO) = Operating profit (or loss) for segment
What items are normally excluded from segment profit/loss?
- general corporate revenues/expenses
- interest expense
- income taxes
- equity in earnings/losses of unconsolidated subsidiary
- gains/losses from discontinued ops
- minority interest
Reportable segment disclosures
- Identifying factors
- Products/services
- Profit/loss
- Assets
- Liabilities (IFRS only)
- Measurement criteria
- Reconciliations
Required enterprise-wide disclosures (regardless of number of reportable segments)
- Products/services
- Geographic areas (related revenues and long-lived assets)
- Major customers (10% or more of revenues)
