Advanced Accounting Chapter 8

A company has three operating segments with the following amounts of profit or loss: Segment A, profit of $1,000; Segment B, profit of $2,500; Segment C, loss of $4,000. The quantitative threshold for determining a significant operating segment under the profit or loss test is

$400.

A company has six operating segments with combined total revenues of $500 million. An operating segment is separately reportable if its revenues exceed

$50 million.

In interim reports companies must disclose

- Contingent items. - Seasonal revenues and expenses. - Basic and diluted earnings per share.

The criteria that must be met for a component of an enterprise to be identified as an operating segment are that it

- Is regularly reviewed by the chief operating decision maker. - Has discrete financial information available. - Generates revenues and incurs expenses.

For all foreign countries in total, an entity must disclose

- Long-lived assets. - External revenues.

An enterprise must provide disclosures for each foreign country in which it has a material amount of

- Long-lived assets. - Revenues from external customers.

In interim reports companies must disclose

- Provision for income taxes. - Sales or gross revenues.

Under U.S. GAAP, in preparing quarterly reports, a company must disclose for each operating segment the amount of

- Revenues from external customers. - Inter-segment revenues. - Segment profit or loss.

For each separately reportable operating segment, an enterprise must report

- Revenues from inter-segment sales. - Profit or loss. - Revenues from sales to external customers. - Total assets.

The denominator in applying the revenue test to determine whether an operating segment is significant should include

- Revenues from sales to other segments. - Revenues from sales to outside customers.

Companies must disclose differences in measuring

- Segment profit or loss and consolidated income before tax. - Segment assets and consolidated assets.

An entity must explain that way it measures

- Segment profit or loss. - Segment assets.

ABC Company has three segments that had the following amounts of profit or loss in the current year: 10,000 profit, 30,000 profit, and 5,000 loss. What is the amount of profit or loss that a segment must have to meet the profit or loss test?

4,000

A company has three operating segments with a combined profit of $900 and one operating segment with a loss of $200. The quantitative threshold for determining a significant operating segment under the profit or loss test is

90

A difference between IFRS and U.S. GAAP with respect to reporting by operating segment is

IFRS requires disclosure of segment liabilities but U.S. GAAP does not.

The objective ___ of reporting is to provide information about an enterprise's different business activities and operating environments.

Segment

Unlike U.S. GAAP, for interim reporting purposes, IFRS requires each interim period to be treated as

a discrete accounting period in its own right.

A company pays its annual income taxes in December of each year. Under IFRS, tax expense should be

accrued at the end of each interim period

A company pays its annual license fee to the local county government in the second quarter of each year. The total fee paid should be

allocated as expense in equal amounts to each quarter of the year.

When an entity has a matrix organization, U.S. GAAP requires operating segments to be based on products and services rather than geographic areas. In this situation, IFRS

allows operating segments to be based on either products and services or geographic areas.

To recognize income tax expense at the end of each interim period a company must estimate what it believes its ___ effective tax rate will be.

annual

An entity has reported a sufficient number of operating segments separately when

at least 75% of consolidated revenue has been reported by individual segments.

In the third quarter of the current year, a company decides to change its accounting method related to inventory. The company is able to calculate the impact that the new method would have had on the first- and second-quarter financial statements if the new method had been adopted at the beginning of the year. The company should use the new accounting method:

beginning in the third quarter of the current year and restate amounts reported in the first and second quarters for the accounting method change.

In interim reports companies are not required to disclose

cost of goods sold.

For each separately reportable operating segment, an enterprise must report

depreciation expense.

A company with international activities must disclose revenues and long-lived assets located in the ___ country and in all foreign countries in total.

domestic

A company should estimate its annual ___ tax rate in calculating income tax at the end of each interim period.

effective.

Companies must disclose the seasonal nature of their business operations when they

experience a spike in sales volume in one specific quarter each year.

Operating segments that are individually significant and otherwise separately reportable may be combined if they

have essentially the same business activities in essentially the same business environments.

A cost that is incurred in the second quarter of the year but which benefits all four quarters of the year should be recognized as an expense

in all four quarters of the year.

When an interim period is treated as a discrete period in its own right, bonuses paid to key employees in December are recognized

in total in the fourth quarter of the year.

A customer from whom an enterprise generates 10% or more of total revenues is referred to as a ___ customer.

major.

A company using LIFO to account for inventory sells more units of product in the first quarter of the year than it produces, which results in a LIFO liquidation. However, by the end of the year, the company expects there to be no LIFO liquidation. In preparing its first quarter financial statements the company should

make an adjustment to cost of goods sold to offset the effect of the LIFO liquidation.

A company must report revenues from transactions with external customers for each country in which it has a ___ amount of external revenues.

material.

ABC Company owns four restaurants that serve breakfast sandwiches in four different cities. The economic environment in the four cities is similar, but each restaurant meets the definition of an operating segment. ABC Company

may combine the four restaurants into one reportable segment.

An entity's operating segments measure pension expense on a cash basis (i.e., the amount of cash contributed to the pension fund), whereas, in preparing consolidated financial statements, the entity must measure pension expense on an accrual basis in accordance with GAAP. In this situation, the amount of pension expense used in reporting segment profit or loss must be

measured on a cash basis.

In interim reports, operating segment information

must be provided for revenues (external and intersegment), and segment profit or loss.

A company has eight operating segments, five of which pass one or more quantitative thresholds to be considered separately reportable. The five separately reportable operating segments have 70 percent of total company consolidated sales to outside customers. The company

must separately report additional segments until the total combined sales of reported segments is at least 75 percent of consolidated sales.

A company's operating segments are separately reportable when total segment assets are $5 million. The company's total assets must be

no higher than $50 million.

When an interim period is treated as an integral portion of an entire year, bonuses paid to key employees in December are recognized as expense

on a proportionate basis in each of the four quarters of the year.

Even if an enterprise has only one operating segment, it still must report information about its ___ and services.

products

Treating an interim period as an integral part of an annual period results in expenses paid in one interim period that relate to the entire year being recognized as expense

proportionately over all interim periods of the year.

A company pays its annual property tax expense in March of each year. Under IFRS, property tax expense should be

recognized in full in the first quarter of the year.

A company makes an accounting change in the third quarter of the current year. That change must be applied to the first and second quarters of the year.

retrospectively.

A toy manufacturing company makes more than one-half of its annual sales in the fourth quarter of the year when customers place orders for the holiday season. In accordance with FASB ASC 270, the company must disclose ___ the nature of its business operations.

seasonal

An operating segment is significant based on the profit or loss test if its profit or loss is 10% or more of

the larger of the combined profit of all profitable segments or the combined loss of all segments reporting a loss.

ABC Company's operating segments use a cash basis of accounting to determine the amount of pension expense included in the measure of segment operating income reported to corporate headquarters. Adjustments are made at corporate headquarters to convert segment pension expense from a cash basis to an accrual basis for inclusion in the company's U.S. GAAP consolidated financial statements. In accordance with authoritative guidance, ABC Company must report segment profit or loss for each operating segment

using pension expense determined on a cash basis.

An operating segment is significant if its total revenues are ___ percent or more of the combined total revenues of all reported operating segments.

10

An entity must disclose that it has a major customer when

10% or more of consolidated revenues are generated from that customer.

A company has six operating segments that have combined total assets of $100 million. Each operating segment is separately reportable whose total assets are at least equal to

$10 million.

An operating segment is significant if its assets are ___ percent or more of the combined assets of all operating segments.

10

Segment reporting provides information about the different

Business activities in which an enterprise engages.

The denominator in applying the asset test to determine whether an operating segment requires separate disclosure is

Combined assets of all operating segments.

Some companies are organized and provide segment disclosures on the basis of geographic areas only. An example of such a company is

McDonald's. Apple.

Even if an enterprise has only one operating segment it still must report the amount of revenue generated by each of its major products and services.

True.

A component of an enterprise that recognizes revenues and expenses, is regularly reviewed by the chief operating decision maker, and has discrete financial information is a(n) ___ segment.

Operating

True or false: Gross profit in the first quarter of the year should not reflect the effect of a LIFO liquidation if the company does not expect the LIFO liquidation to continue until the end of the year.

True.

A segment is separately reportable if its total revenues (both internal and external) are equal to at least 10% of an entity's combined revenue of all reported operating segments (both internal and external).

True