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Opto Co. is a publicly-traded, consolidated enterprise reporting segment information. Which of the following items is a required enterprise-wide disclosure regarding external customers?

The fact that transactions with a particular external customer constitute more than 10% of the total enterprise revenues. In order to conform to GAAP, financial statements for public business enterprises must report segment information about a company's major customers if that customer provides 10% or more of the combined revenue, internal and external, of all operating segments.

Terra Co.'s total revenues from its three operating segments were as follows: Which operating segment(s) is (are) deemed to be reportable segments?

Lion, Monk, and Nevi. A reportable operating segment is one having 10% of all revenue, including revenue from unaffiliated sales and from intersegment sales: Thus, all three segments meet the 10% of total revenues test and are reportable as operating segments.

Hyde Corp. has three manufacturing divisions, each of which has been determined to be a reportable segment. In Year 1, Clay division had sales of $3,000,000, which was 25% of Hyde's total sales, and had operating costs of $1,900,000, as reported to the CFO. In Year 1, Hyde incurred operating costs of $500,000 that were not directly traceable to any of the divisions. In addition, Hyde incurred corporate interest expense of $300,000 in Year 1. In reporting segment information, what amount should be shown as Clay's operating profit for Year 1?

$1,100,000 $1,100,000 operating profit for clay. Rule: Operating profit by segments is based on the measure of profit reported to the "chief operating decision maker." Allocations for general operating costs and interest, etc., should not be made solely for purposes of segment disclosures.

The following information pertains to revenue earned by Timm Co.'s industry segments for the year ended December 31: In conformity with the revenue test, Timm's reportable segments were:

Only Bix and Dil. Only Bix and Dil qualify as reportable segments. When using revenues as criteria, a segment must include at least 10 percent of combined revenues, including intersegment sales. Bix and Dil division revenues exceed $8,300, whereas Alo and Cee division revenues do not. Additionally, Bix and Dil together account for more than 75 percent of Timm's total sales to unaffiliated customers (external sales), so no additional reportable segments need to be identified.

Which of the following types of entities are required to report on business segments?

Publicly-traded enterprises. Only publicly-traded enterprises are required to report on business segments.

In financial reporting of segment data, which of the following items is always used in determining a segment's operating income?

Sales to other segments. Sales to other segments would be used in determining a segment's operating income. Rule: Equity in net income of another company, general corporate expenses, interest, income tax expense, and gains or losses on discontinued operations are all not included in segment profit unless they are included in the determination of segment profit reported to the "Chief Operating Decision Maker."

YIV, Inc. is a multidivisional corporation, which has both intersegment sales and sales to unaffiliated customers. YIV should report segment financial information for each division meeting which of the following criteria?

Segment revenue is 10% or more of combined revenue of all the company segments. Segment revenue is 10% or more of combined revenue of all the company segments. Rule: To be significant enough to report on, a segment must be at least 10% of: 1. Combined revenues (whether intersegment or affiliated customers), or 2. Operating profit (of all segments not having an operating loss), or 3. Identifiable assets.

The following information pertains to Aria Corp. and its divisions for the year ended December 31: Aria and all of its divisions are engaged solely in manufacturing operations. Aria has a reportable segment if that segment's revenue exceeds:

$260,000 $260,000 represents a reportable segment (10% of total sales): Rule: To be significant enough to report on, a segment must be at least 10% of: 1. Combined revenues (whether intersegment or unaffiliated customers), or 2. Operating income, or3. Identifiable assets.

Taft Corp. discloses supplemental industry segment information. The following information is available for the current year: Additional expenses, not included above, are as follows: Segment C's current year operating profit was:

$5,000 $5,000 operating profit for Segment C.Rule: Operating profit by segments is based on the measure of profit reported to the "Chief Operating Decision Maker." Interest expense, income taxes, and general corporate expenses are not allocated to the divisions solely for the purposes of segment disclosures; they may be allocated if that is how the segments report to the "Chief Operating Decision Maker."

An enterprise must separately report information about an operating segment when the segment's revenue meets what minimum percentage of the combined revenue of all reported operating segments?

10% The 10% "Size" test is the quantitative threshold for reportable segments. Any of the three criteria are applicable: 1. Reported revenue (sales to external customers and intersegment sales) greater than or equal to 10% of combined revenue (internal and external) of all operating segments. 2. Reported profit/loss greater than or equal to 10% of the greater (absolute value) of: a. Combined profit of all operating segments that did not report a loss.b. Combined reported loss of all operating segments that did report a loss 3. Assets greater than or equal to 10% of the combined assets of all operating segments.

In financial reporting of segment data, which of the following must be considered in determining if an industry segment is a reportable segment?

A segment is considered reportable if its reported revenue, including sales to unaffiliated customers and intersegment sales, is 10% or more of the combined revenue (unaffiliated and intersegment) of all operating segments.

What information should a public company present about revenues from its reporting segments?

Disclose separately the amount of sales to unaffiliated customers and the amount of intracompany sales. Unaffiliated customers sales and intracompany sales must be disclosed separately.

Which of the following should be disclosed for each reportable operating segment of an enterprise under U.S. GAAP?

For each reportable segment of an enterprise, both profit or loss and total assets should be disclosed under U.S. GAAP. In disclosure questions, if you are not sure, disclose the most rather than the least.

Which of the following factors determines whether an identified segment of an enterprise should be reported in the enterprise's financial statements?

I only. For segment reporting, if an identified segment's assets constitute more than 10% of the combined assets of all operating segments, the segment should be reported. The same rule does not apply for the segment's liabilities. The candidate does have to remember the 10% and also the 10% of "what."

Grum Corp., a publicly-owned corporation, is subject to the requirements for segment reporting. In its income statement for the year ended December 31, Grum reported revenues of $50,000,000, operating expenses of $47,000,000, and net income of $3,000,000. Operating expenses include payroll costs of $ 15,000,000. Grum's combined identifiable assets of all industry segments at December 31, were $40,000,000.In its financial statements, Grum should disclose major customer data if sales to any single customer amount to at least:

$5,000,000 $5,000,000 (10% x $50,000,000 revenue). If revenue from a single external customer is 10% or more of total revenue, then the company should disclose this fact, the total amount of revenue from the customer, and the segment or segments reporting the revenues. The identity of the customer need not be disclosed.

Swift Co. has identified three operating segments that may require separate disclosure in Swift's general purpose financial statements for the year ended December 31, Year 2. Information for Year 2 follows: Which of Swift's segments are required to be separately disclosed in its December 31, Year 2, financial statements?

A and B only. In order to be a reportable segment, an individual segment must meet the 10 percent size test. The test is applied to revenues, reported profit (loss), and assets, and any segment that meets the 10 percent threshold in any of these categories will be reported separately. The thresholds are $17.7 for revenues (10 percent of $177); $7.7 for the greater of combined profits or combined losses (10 percent of $77 in combined profits); and $135 for assets (10 percent of $1,350). A and B both have revenues that exceed $17.7, profits that exceed $7.7, and assets that exceed $135. C does not meet any of the criteria, and so only A and B will be separately disclosed.

The Ajax Corporation reported the following operating results and net income (net loss) from its components for the year ended December 31: Based purely on operating results, which of the components would be deemed reportable segments?

Astor, Carter, and Davis. RULE: A segment meets the size test if the absolute amount of its reported profit or loss is 10% or more of the greater, in absolute amount, of: 1. The combined reported profit of all operating segments that did not report a loss, or 2. The combined reported loss of all operating segments that did report a loss. Astor, Carter, and Davis exceed the 10% threshold test for segment reporting. Application of the rule is computed as follows: Ajax determines its segments based on unconsolidated financial results by segment. The absolute amount of income ($325,000) is greater than the absolute amount of loss ($200,000). Ajax uses 10% of total income from segments earning income, or $32,500, as the basis for determining reportable segments.

Alpha Co. has $100 billion in assets, $100 billion in revenues, and $10 billion in profits for the current year. There are four operating segments that report directly to the chief operating officer. Which of the following segments is required to present key disclosures?

Segments 1, 2, and 3 A segment is deemed significant and requires disclosure as long as it meets the 10 percent "size" test. This test is met using any of the three criteria shown below: Assets: The segment's identifiable assets are 10 percent or more of the combined assets of all operating segments. Revenue: The segment's revenue (external and internal) is 10 percent or more of the combined revenue of all operating segments.Reported profit or loss: The absolute value of the segment's reported profit or loss is 10 percent or more of the greater (absolute amount) of the combined profit of all segments that did not report a loss and the combined reported loss of all segments that did report a loss. With $100 billion in assets, the 10 percent threshold is $10 billion. Segments 1, 2, and 3 all have assets over $10 billion. With $100 billion in revenues, the 10 percent threshold is $10 billion. Segments 1 and 2 each have revenues over $10 billion. With $10 billion in profits, the 10 percent threshold is $1 billion. Segment 1 meets this threshold. Because only one of the three criteria need to be met for a segment to have required disclosure, Segments 1, 2, and 3 will all qualify.


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