Segment Reporting

GAAP requires public companies to report certain key information about significant portions of their business, called reportable segments.

In calculating each segment's operating profit or loss, the entity's shared indirect operating costs are allocated among the various segments while general corporate expenses incurred are not allocated.

In evaluating whether or not a business segment is a reportable segment, an entity will compare the segment's revenues to total revenues of all segments. Revenues include sales to unaffiliated customers and to other segments.

It does not, however, include interest earned on intersegment loans, which is a form of other income but not revenues.

There is a method in segment reporting to help define what constitutes a "segment". The method that is used under ASC 280 is called

Management Approach The method for determining what segments are part of an entity is referred to as the management approach. This is because segments are identified as those activities involving revenues and expenses that are evaluated by management. As a result, management may decide to identify segments by type of activity, such as manufacturing and sales; product, such as clothing and accessories; geographical location; or some other criteria.

Public companies must report certain information about significant portions of their business called reportable operating segments. Under the management approach...

Reportable segments are evaluated by the company's chief operating decision makers. If a segment contributes at least 10% of the company's revenues, assets, or profits, the segment is reportable.

A segment is reportable if it contributes at least 10% of the total for all segments of one or more of the following:

Revenues Assets Profits

here are three tests to identify a reportable segment that involve comparing the revenues, assets, and profits of individual segments to the company as a whole.

If a segment contributes at least 10% of the company's revenues, assets, or profits (with some exceptions), the segment is reportable and must be disclosed by the entity. The revenue test is based on the combined revenues of all segments, including sales to unaffiliated customers and intersegment sales.

Publicly held companies must report certain key information about significant portions of their business, referred to as reportable segments.

A segment represents any group of activities with revenues and expenses that management regularly evaluates as a single unit (ie, management approach). Segments may be identified by activity, product, or customers.

Peer Inc. is a publicly-traded enterprise and therefore must disclose information regarding its operating segments. Which of the following should be disclosed for each of Peer's reportable operating segments? A. Both profit and loss and total assets must be reported. B. Only profit and loss, but not total assets must be reported. C. Only total assets, but not profit and loss must be reported. D. Neither total assets, not profit and loss must be reported.

A. Both profit and loss and total assets must be reported. When a publicly-traded entity has reportable segments, it is required to report each segment's profit or loss and its total assets.

A public company should disclose information about profit or loss

and total assets for each reportable operating segment.

In response to operating diversification and an increase in consolidated financial reporting, GAAP requires public companies to separately report certain information about portions of their business.

Each reportable segment must separately disclose the amount of sales to unaffiliated customers and the amount of intracompany sales between geographic areas.

True or false, general corporate expense is considered in determining a segment's operating income.

False

Public companies must disclose the fact that any individual customer provides at least 10% of the company's consolidated revenues (not a segment's revenues) and the total amount of revenue from every such customer.

The company does not need to disclose such customers' identities.

A reportable segment represents any group of activities (ie, revenues and expenses) that the entity's chief operating decision makers regularly evaluate as a single unit

This is referred to as the "management approach"

True or false, Income tax expense is not considered in determining a segment's operating income.

True

True or false, general corporate expenses are not considered as part of the profit test

True

Similar to US GAAP, entities use three tests under IFRS,

a revenue test, a total asset test, and a profit or loss test, to identify reportable segments.