Define a "major customer" of a company. What information must be disclosed about the major customers?...

Define a "major customer" of a company. What information must be disclosed about the major customers? Why is the disclosure of this information important? Are the names disclosed? Should they be?

Expert Solution

A “major customer” of a company is a customer, if revenues from single customer amount to 10% or more of entity revenues (only external revenue is considered)

The disclosure of the fact that the customer is a major customer, the total amount of revenues from each such customer and identity of the reportable segment or segments reporting the revenues shall be made by the entity.

The disclosure of major customer is important because it shows the extent of a firm’s reliance on the customers and how much revenue is generated by each such customer. This information is relevant and material from the end user point of view to understand how much material impact a customer can have on the revenues of the firm.

The entity need no disclose the identity of a major customer or the amount of revenues that each segment reports from that customer. The disclosure is required at overall revenue level only. The names should not be disclosed because it can affect the firm and the rival firms would be aware of such customers.

ekkarill92 answered 2 years ago

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