Actg standards ASC 280-10 Segment Reporting

What if a previously reported segment no longer meets the criteria in the current period?

If management judges an operating segment identified as a reportable segment in the immediately preceding period to be of continuing significance, information about that segment shall continue to be reported separately in the current period even if it no longer meets the criteria for reportability in paragraph 280-10-50-12.

What is meant by the management approach for determining operating segments?

Operating segments are a company's revenue-producing components for which it produces separate financial information for internal use that is reviewed regularly by the company's chief operating decision maker. This is the individual, the CFO or COO, or group, a management or executive committee, that allocates the company's resources and assesses how its segments perform. Statement no. 131 allows companies some flexibility in how they determine their segments, including by products and services, geography, legal entity or type of customer

What are the three quantitative tests for determining reportable segments?

1. Its reported revenue, including both sales to external customers and intersegment sales or transfers, is 10 percent or more of the combined revenue, internal and external, of all operating segments. 2. The absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount, of either: The combined reported profit of all operating segments that did not report a loss The combined reported loss of all operating segments that did report a loss. 3. Its assets are 10 percent or more of the combined assets of all operating segments.

Quantitative Thresholds for reporting

50-12 A public entity shall report separately information about an operating segment that meets any of the following quantitative thresholds (see Example 2, Cases C, D, and E [paragraphs 280-10-55-39 through 55-45]): a. Its reported revenue, including both sales to external customers and intersegment sales or transfers, is 10 percent or more of the combined revenue, internal and external, of all operating segments. b. The absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount, of either: 1. The combined reported profit of all operating segments that did not report a loss 2. The combined reported loss of all operating segments that did report a loss. c. Its assets are 10 percent or more of the combined assets of all operating segments. Operating segments that do not meet any of the quantitative thresholds may be considered reportable, and separately disclosed, if management believes that information about the segment would be useful to readers of the financial statements.

Can public entity combine segments that don't meet quantitative reportable criteria?

50-13 An entity may combine information about operating segments that do not meet the quantitative thresholds with information about other operating segments that do not meet the quantitative thresholds to produce a reportable segment

What if total revenue reported by operating segments don't meet the 75% of total consolidated revenue requirement?

50-14 If total of external revenue reported by operating segments constitutes less than 75 percent of total consolidated revenue, additional operating segments shall be identified as reportable segments (even if they do not meet the criteria in paragraph 280-10-50-12) until at least 75 percent of total consolidated revenue is included in reportable segments.

What if a new segment is identified in current period not previously reported?

50-17 If an operating segment is identified as a reportable segment in the current period due to the quantitative thresholds, prior-period segment data presented for comparative purposes shall be restated to reflect the newly reportable segment as a separate segment even if that segment did not satisfy the criteria for reportability in paragraph 280-10-50-12 in the prior period unless it is impracticable to do so. For purposes of this Subtopic, information is impracticable to present if the necessary information is not available and the cost to develop it would be excessive.

Does a public entity have to aggregate similar segments?

50-18A An entity need not aggregate similar segments, and it may present segments that fall below the quantitative thresholds.

Explain the 75% rule

If total of external revenue reported by operating segments constitutes less than 75 percent of total consolidated revenue, additional operating segments shall be identified as reportable segments (even if they do not meet the criteria in paragraph 280-10-50-12) until at least 75 percent of total consolidated revenue is included in reportable segments.

What information is required to be disclosed about segments?

a. Factors used to identify the public entity's reportable segments, including the basis of organization (for example, whether management has chosen to organize the public entity around differences in products and services, geographic areas, regulatory environments, or a combination of factors and whether operating segments have been aggregated) b. Types of products and services from which each reportable segment derives its revenues.

2. An operating segment has ALL of these characteristics?

a. It engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same public entity). b. Its operating results are regularly reviewed by the public entity's chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance. c. Its discrete financial information is available.

Define a public entity

a. It has issued debt or equity securities or is a conduit bond obligor for conduit debt securities that are traded in a public market (a domestic or foreign stock exchange or an over-the-counter market, including local or regional markets). b. It is required to file financial statements with the Securities and Exchange Commission (SEC). c. It provides financial statements for the purpose of issuing any class of securities in a public market.

A public entity also shall disclose all of the following about each reportable segment if the specified amounts are included in the measure of segment profit or loss reviewed by the chief operating decision maker or are otherwise regularly provided to the chief operating decision maker, even if not included in that measure of segment profit or loss

a. Revenues from external customers b. Revenues from transactions with other operating segments of the same public entity c. Interest revenue d. Interest expense e. Depreciation, depletion, and amortization expense f. Unusual items as described in paragraph 225-20-45-16 g. Equity in the net income of investees accounted for by the equity method h. Income tax expense or benefit i. Extraordinary items j. Significant noncash items other than depreciation, depletion, and amortization expense.

10. What are the criteria for aggregating operating segments?

a. The nature of the products and services b. The nature of the production processes c. The type or class of customer for their products and services d. The methods used to distribute their products or provide their services e. If applicable, the nature of the regulatory environment, for example, banking, insurance, or public utilities.