Question

Required information

An analysis of Abbey Company's operating segments provides the following information:

Operating Segment	Revenues							Segment Profit (Loss)				Segment Assets
	External			Intersegment
A	$	30		$	27			$	6			$	40
B		45			0				32				120
C		36			0				(7	)			82
D		200			116				4				190
E		44			0				(72	)			38

Refer to the above information. Which of the operating segments above are reportable segments?

Multiple Choice

• B, C, and D

• A, B, D, and E

• B, D, and E

• A, B, C, D, and E

Refer to the above information. Which of the operating segments above meet the revenue test?

Multiple Choice

• B, D, and E

• A and D

• A, B, and D

• B, C, D, and E

Refer to the above information. Which of the operating segments above meet the operating profit (loss) test?

Multiple Choice

• B and E

• A and B

• A, B, and E

• A, B, C, and E

Answer 1

Reportable segments are operating segments which have:

• Revenues (internal or external both)at 10% or more of the total revenue of all operating segments
• Profit or loss is 10% or more of the greater of (a) the combined profit/ loss of profit/loss making operating segments,
• Assets should be 10% or more of combined total asset of all operating segments.

Which of the operating segments above are reportable segments?

Operating segment	Revenues	%	Profit/loss	%	assets	%
A	30 + 27 = 57	11.44	6	14.28	40	8.51
B	45 + 0 = 45	9.04	32	76.19	120	25.53
C	36 + 0 = 36	7.23	(7)	16.67	82	17.45
D	200 + 116 = 316	63.46	4	9.52	190	40.42
E	44 + 0 = 44	8.83	(72)	171.43	38	8.09
TOTAL	498		42		470

All are reportable operating segments because each one have their percentages at 10% or greater in any one area atleast.

Thus, correct answer is A, B, C, D, and E

Which of the operating segments above meet the revenue test?

Only A and D have met the revenue test with 10% or greater percentage.

Which of the operating segments above meet the operating profit (loss) test?

According to the table of profits and losses, profitable segments brought in $42 while unprofitable segments lost $79. That means a segment must be separately reported if profit or loss was greater than $4.2. For this example, results for all but Segment D need to be disclosed separately. D has not meet the standards.

Only A, B, C, E has met the standards.