Advanced Accounting - Ch 8

NOT necessarily true for an operating segment:

An operating segment regularly generates a profit from its normal ongoing operations.

In considering interim financial reporting, how does current US GAAP require that such reporting be viewed:

As reporting for an integral part of an annual period.

True statement concerning US GAAP:

Does not require segment information to be reported in accordance with generally accepted accounting principles.

Segment tests

1. Revenue 2. Profit and Loss 3. Asset

Must be disclosed by geographic area

Revenues from external customers

NOT required to be reported in interim financial statements for each material operating segment

Segment assets

Operating segment disclosures required under current US accounting guidelines.

Intersegment sales Interest expense Unusual items

Information a company is NOT required to disclose under current US accounting guidelines.

Revenues generated from export sales.

Information a company is required to disclose (even if it is material in amount) under current US accounting guidelines.

Revenues generated from sales to Walmart. Revenues generated by its Japanese sub. Revenues generated from sales of its consumer products line of goods.

Information items with regard to a major customer must be disclosed:

The operating segment making sales to the major customer.

How should material seasonal variations in revenue be reflected in interim financial statements?

The seasonal nature should be disclosed, and the interim report should be supplemented with a report on the 12-month period ended at the interim date for both the current and preceding years.

Information about revenues by geographic area a company should present:

Disclose separately the amount of sales unaffiliated customers but not the amount of intra-entity sales between geographic areas.

For interim financial reporting, a gain from the sale of land occurring in the second quarter should be

Recognized in the second quarter

Does not have to be reported in the operating segment.

R&D Expense

US GAAP considers these to be objectives of segment reporting.

1. Helps users make more informed judgments about the enterprise as a whole. 2. Helps users better assess the enterprise's prospects for future cash flows. 3. Helps users better understand the enterprise's performance. Whole, future cash, performance

Must be disclosed in interim reports

Gross revenues

Operating segment disclosures NOT required under current US accounting guidelines.

Liabilities

If a company that has managers responsible for product and service lines of business and managers responsible for geographic areas (matrix form of organization):

Under IFRS, the company must refer to the core principle of IFRS 8 to determine operating segments.

Niceville Company pays property taxes of $100,000 in the second quarter of the year. True statement with respect to the recognition of property tax expense in interim financial statements.

Under IFRS, the company would report property tax expense of $100,000 in the second quarter of the year.

Statement NOT true under US GAAP

Companies must combine individual foreign countries int geographic areas to comply with the geographic area disclosure requirements.

On March 15, Calloway, Inc., paid property taxes of $480,000 for the calendar year. .The journal entry at March 15 to record the payment of property taxes would include:

Property Tax Expense $120,000 DR Prepaid Property Taxes $360,000 DR Cash $480,000 CR

Criterion for determining whether an operating segment is separately reportable

Segment assets are 10% or more of combined segment assets.

What is the minimum number of operating segments that must be separately reported?

Segments with at least 75% of the revenues generated from outside parties.

In determining whether a particular operating segment is of significant size to warrant disclosure:

Three tests are applied, and only one must be met.

For a US-based company, this would be an acceptable presentation of countries for providing information by geographic area.

US, Mexico, Japan, Spain, All other countries