Question

Bramble Corp. and its divisions are engaged solely in manufacturing operations. The following data pertain to the segments in which operations were conducted for the year ended December 31, 2021.

						Assets
Industry		Revenue		Profit		12/31/21
A		$ 7920000		$1322000		$15900000
B		6310000		1120000		13990000
C		4950000		952000		10100000
D		2280000		430000		5100000
E		3240000		548000		5670000
F		1230000		179000		2400000
		$25930000		$4551000		$53160000

In its segment information for 2021, how many reportable segments does Bramble have?

Answer 1

Assumption : ANSWERS are prepared taking view of US Generally accepted accounting principles and Security Exchanges Commission rules.

Concept :

Segment Reporting - Public entities are required to report on their financial statements information about Operating Segments with following characteristics :

1. It engages in business activities from which it may earn revenues and incur expenses.

2. Its operating results are regularly reviewed by entity's chief operating decisions maker to analyze performance and allocate resources.

3. Its discrete financial information is available.

Reportable Segments CRITERIA :

10% Threshold Tests - A segment is reportable if it contributes at least 10% of overall total of one or more of the following -

1. 10% Revenue Test = If segment's revenues ≥ 10% of entity's Total Revenue.

2. 10% Profit /Loss Test = If segment's Profit / Loss ≥ 10% of greater than absolute amount of Profit or Loss for all segments that had a Profit / Loss respectively.

3 . 10% Asset Test = If segments asets ≥ 10% of entity's identifiable assers.

Additional test :

75% test for Consolidation Revenue only - Reportable segments need to include at least 75% of external revenues.

( If the 75% test is not met, additional operating segments need to be identified as Reportable untill the 75% test is satisfied.

Calculation :

1.

10% Revenue Test = Segments Revenues ≥ 10% of entity's Total Revenue.

10% of entity's Total revenues = 10% of $ 25,930,000.

$ 2,593,000.

REPORTABLE SEGMENTS under REVENUE TEST = Segments whose revenue is more than $ 2,593,000.

A - $ 7,920,000 Revenue

B - $ 6,310,000 Revenue

C - $ 4,950,000 Revenue

E- $ 3,240,000 Revenue

Total Revenue for Reportable segments = $ 22,420,000.

Additional test for Revenue of Reportable segments will be at least 75% of total revenue.

Total Revenue for Reportable segments ≥ 75% of total revenue.

$ 22,420,000 ( calculated above ) ≥ 75% of $ 25,930,000.

$ 22,420,000 ≥ $ 19,447,500.

Thus, above Reportable segments fulfill additional test for Revenue as well.

2.

10% Profits Tests = Segments Profit ≥ 10% of Entity's combined Profit.

10% of Entity's combined Profit = 10% of $ 4,551,000

$ 455,100.

REPORTABLE SEGMENTS under PROFIT TEST = Segments whose operating Profit is more $ 455,100.

A- $ 1,322,000.

B- $ 1,120,000.

C - $ 952,000

E- $ 548,000.

3.

10% Assets Tests = Segments Assets ≥ 10% of Entity's identifiable assets.

10% of Entity's identifiable assets= 10% of $ 53,160,000.

$ 5,,316,000.

REPORTABLE SEGMENTS under ASSETS TEST = Segments whose assets are more than $ 5,316,000.

A- $ 15,900,000

B- $ 13,990,000.

C- $ 10,100,000.

E- $ 5,670,000.

Conclusion :

A,B,C and E Segments are REPORTABLE under REVENUE , PROFIT and ASSETS TESTS. As all tests showed same Reportable Segments.