Question

Snow White Company has identified 5 industry segments: Dopey, Doc, Happy, Grumpy and Sleepy. It appropriately consoldidated
each of these segments in producing its annual financial statements. Information describing each segment (in millions) follows:
			Dopey	Doc	Happy	Grumpy	Sleepy
Sales to outside parties			6644	2334	701	412	0
Intersegment transfers			144	169	134	146	0
interest income from outside parties			0	32	19	0	40
interest income from intersegment loans			0	0	0	0	197
operating expenses			4174	1742	1046	644	29
interest expense			74	29	64	30	100
tangible assets			1481	3176	504	751	169
intangible assets			85	399	0	61	0
intersegment loans (debt)			0	0	0	0	702
Snow White does not allocate its 1480 in common expenses to the various segments
Perform testing procedures to determine Snow White's reportable operating segments
	a) Revenue test
	b) Profit or loss test
	c) Asset test
For each test and each segment determine whether it is a reportable or not reportable segment.

Answer 1

As per US GAAP, a segment is reportable if it has at least:

• 10% of the revenues of the entity

• 10% of the profit or loss of the entity, or

• 10% of the combined assets of the entity

• If the total revenue of the segments that are reportable comprise less than 75% of the entity's total revenue, then more segments should be added until that threshold is reached

Revenue Test
	Dopey	Doc	Happy	Grumpy	Sleepy	Total
Sales to outside parties	6644	2334	701	412	0	10091
Intersegment transfers	144	169	134	146	0	593
Total	6788	2503	835	558	0	10684
% of total revenue	63.53%	23.43%	7.82%	5.22%	0.00%
Reportable (Yes / No)	Yes	Yes	No	No	No

Profit or Loss Test
	Dopey	Doc	Happy	Grumpy	Sleepy	Total
Total revenue	6788	2503	835	558	0	10684
Add: Interest income from outside parties	0	32	19	0	40	91
Add: Interest income from intersegment loans	0	0	0	0	197	197
Less: Operating expenses	4174	1742	1046	644	29	7635
Less: Interest expense	74	29	64	30	100	297
Profit or Loss	2540	764	-256	-116	108	3040
% of total Profit or Loss (absolute values)	83.55%	25.13%	8.42%	3.82%	3.55%
Reportable (Yes / No)	Yes	Yes	No	No	No

Asset Test
	Dopey	Doc	Happy	Grumpy	Sleepy	Total
Tangible assets	1481	3176	504	751	169	6081
Intangible assets	85	399	0	61	0	545
Total	1566	3575	504	812	169	6626
% of total assets	23.63%	53.95%	7.61%	12.25%	2.55%
Reportable (Yes / No)	Yes	Yes	No	Yes	No