Question

The following operating segment is presented for Brisbane Pty Ltd.

                                                Segment Revenue      Segment Profit            Segment Assets

                                                ($’000)                         ($’000)                         ($’000)

Club Membership                   700                              100                              1,000

Canteen sales                         125                              20                                200

Sponsorships                          50                                (35)                              100

Clothing                                   90                                5                                  90

                                                ——                             ——                             ——

Total                                        965                              90                                1390

Determine which segments are reportable according to the guidelines provided in the Australian Accounting Standards. Justify

Answer 1

Segment are reportable if they satisy the folloiwng conditions:

1.Its reported revenue, from sales to external customers and intersegment sales or transfers, is 10 per cent or more of the combined revenue, internal and external, of all operating segments.

2.The absolute amount of its reported profit or loss is 10 per cent or more of the greater, in absolute amount, of (i) the combined reported profit of all operating segments that did not report a loss and (ii) the combined reported loss of all operating segments that reported a loss.

3.Its assets are 10 per cent or more of the combined assets of all operating segment.

Now lets verify it on revenue

Club membership=700/965=72.53%

Canteen sales=125/965=12.95%

Sponsorships=50/965=5.18%

Clothing=9.32%

Reportable segment as per Revenue guidelines are Club membership and canteen sales as revenue are greater than 10% of total revenue

Now lets verify it on Segment profit

Combined Profits =100+20+5=125

Combined losses=35

Greater=125

Now lets verify segments on basis of profit or loss

Club membership=100/125=80%

Canteen sales=20/125=16%

Sponsorships=35/125=28%

Clothing=5/125=4%

So segment reportable is Club membership, canteen sales, sponsorship as its profit or loss is greater than 10% of greater of combined profit of operating segments.

Now lets verify segments on basis of Segment assets

Club membership=1,000/1390=71.94%

Canteen sales=200/1390=14.38%

Sponsorships=100/1390=7.19%

Clothing=90/1390=6.47%

So segment reportable is Club membership, canteen sales, as its Segment assets is greater than 10% of total segment assets.