8-Segment and Interim Reporting

Items of information required to be disclosed for each reportable operating segment

General Information, Profit or loss Information, Balance Sheet Information

Geographic area information must be disclosed even if the company has only one operating segment and therefore does not otherwise provide segment information

SFAS 131 provides no quantitative threshold for determining when revenues or assets in an individual foreign country are material, left to manager's JUDGMENT

If operating segments are not based on geography, information must be reported

1. for the domestic country, 2. for all foreign operations, 3. for each foreign contry in which a material amount of revenues are derived or assets are held

Balance sheet information

Total segment assets; Investment in equity method affiliates; Expenditures for additions to long-lives assets

the total of the reportable segments' revenues must be reconciled to consolidated revenues and the total of reportable segments' profit or loss must be reconciled to income before tax for the company as a whole

adjustments and eliminations made to the segment amounts to prepare consolidated statements in compliance with GAAP miust be identified

Matrix form of organization

certain managers responsible for product lines, other managers responsible for geographic areas

Companies are often organized into

"divisions" based on products/services or geographic areas- divisions generally will be operating segments

Major issues in complying with SFAS 131

1. Identify operating segments; 2. Determine which operating segments are reportable (based on product lines)

2 items of information that must be disclosed about geographic areas

1. Revenues form external customers. 2, long-lived assets

General Information

factors used to identify operating segments; types of products and services from which each operating segment derives its revenues

FASB 131 requires

requires segment information to be provided as it is prepared by the company's internal reporting system EVEN IF NOT BASED ON GAAP

Asset test

segment assets are 10 percent or more of the combined assets of all operating segments

profit or loss test

segment profit or loss is 10 percent or more of the greater (in absolute terms) of the combined reported profit of all profitable segments or the combined reported loss of all segments incurring a loss

In reconciling the total of segments' revenues, profit or loss, and assets to the enterprise totals, the aggregate amount of revenues, profit or loss, and assets from non-significant operating segments must be disclosed.

assets, revenues, expenses, gains, losses, interest expense, and depreciation, depletion, and amortization expense for components of the enterprise that are not operating segments must be disclosed.

3 quantitative tests

Revenue test; profit or loss test; asset test

An operating segment is a component of an enterprise:...

1. that engages in business activities from which it earns revenues and incurs expenses; 2. whose operating results are regularly reviewed by the chief operating decision maker to assess performance and make resource allocation decisions; 3. for which discrete financial information is available.

Profit or Loss Information

Segment profit or loss; Revenues from external customers; Revenues from transactions with other operating segments; Interest revenue and interest expense (reported separately), net interest may be reported for finance segments if this measure is used internally for evaluation; Depreciation, depletion, and amortization expense; other significant noncash items included in segment profit or loss; Unusual items (discontinued operations and extraordinary items); Income tax expense or benefit

Information about major customers

if a company generates 10% or more of its revenues from a single customer fhis fact must be disclosed; the existence of all major (10% or more) customers must be disclosed along with the related amount of revenues and the identity of the operating segment earning the revenues; the identity of the customer need not be discolsed; major customer disclosures are required even if a company operates only in one segment and therefore doesnot provide segment information.

Information about products and services

if operating segments are not based on products or services or if a company has only one operating segment, SFAS 131 requires disclosure of revenues derived from transactions with external customers from each product or service

revenue test

segment revenues, both external and intersegment, are 10 percent or more of the combined revenue, internal and external, of all reported operating segments.