Question
In: Accounting
Our company has 5 business units that we classify as operating segments. Financial data for these...
Our company has 5 business units that we classify as operating segments. Financial data for these units follows: (dollar values in thousands) A B C D E Sales $450 $1,275 $1,500 $4,500 $7,500 Profit ($300) $750 ($449) $1,500 $3,750 Assets $4,800 $1,800 $1,950 $12,000 $18,000 Required: Calculate the quantitative thresholds and determine which of these operating segments should be disclosed in the footnotes to our financial statements? Please answer "yes" in the area where the threshold is met and "no" where the threshold is not met.
Solutions
Expert Solution
Solution-
Calculation of quantitative threshhold -
Operating segment should be disclosed if
- Segment revenue is greater than or equal to 10% if total revenue (Internal and External)
- Segment result is greater than or equal to 10% of greater of
-Total profit of all segment in profit &
-Toatl Loss of all segment in loss
- Segment Asset is greater than or equal to 10% of total asset
On the basis of above we solve the above solution-
Segment revenue
| A | B | C | D | E | TOTAL REVENUE |
| $450 | $1275 | $1500 | $4500 | $7500 | $15225 |
| 2.90% | 8.30% | 9.80% | 29.55% | 49.26% |
NO NO NO YES YES
Segment result
Total Loss - $ 749
Total Profit - $ 6000
| A | B | C | D | E | |
| ($300) | $750 | ($449) | $1500 | $3750 | |
| 40% | 12.50% | 60% | 25% | 62.5% |
YES YES YES YES YES
Segment Asset
| A | B | C | D | E | Total |
| $4800 | $1800 | $1950 | $12000 | $18000 | $38550 |
| 12.45 % | 4.67% | 5.06% | 31% | 46.70% |
YES NO NO YES YES
So as per above if any of the paramentre satisfied for each businuss unit then it will be considered as a operating segment
Unit A- Segment result and segment asset criteria is satisfied hence it will be disclosed in footnote
Unit B -Segment result criteria is satisfied hence it will be disclosed in footnote
Unit C - Segment result criteria is satisfied hence it will be disclose in footnote
Unit D -All the criteria is satisfied hence it will be disclosed in footnote
Unit E- All the criteria is satisfied hence it will be disclosed in footnote
Hence we conclude that all the unit are need to be disclosed as one or all criteria are satisfied for units
ekkarill92 answered 2 years agoRelated Solutions
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