77. Discuss the entity-wide disclosures in AASB 8 that need to been made about major customers.Chapter 24 Key The core principle of AASB 8 Operating Segmentsis for a reporting entity to disclose information to enable users of its financial statements to evaluate the nature and financial effects of the business activities in which it engages and the economic environments in which it operates. TRUE chapter Chapter 24 #1 Ditty: Easy Section: 2402 An introduction to AASB § If a financial report contains both the consolidated financial statements of a parent and the parent's separate financial statements, segment information is required for both statements. FALSE Chapter - Chapter 242 Ditty: Easy Section 2401 Advantages and disadvantages of segment reporting Two or more operating segments may be aggregated into a single operating segment if aggregation is consistent with the core principle of AASB 8, or the segments have similar economic characteristics, or the segments are similar in the nature of the products and services. FALSE Chapter - Chapter 243 Ditty: edurn Section: 2404 Defining a reportable segrnentAASB 8 Operating Segments requires reconciliation of total reportable segment revenues, total profit or loss, total assets, total liabilities and other amounts disclosed for reportable segments to the corresponding amounts shown in the parent entity's separate financial statements. FALSE chapter ~ Chapter 24784 Ditty: Easy Seation' 2407 Reconcilaion of segment information to financial saternents AASB 8 Operating Segmentsrequires an entity to report a measure of segment liabilities and particular income and expense items, if such measures are regularly provided to the chief operating officer. TRUE Chapter - Chapter 2425 Ditty: Easy Section: 24.05 Measurement of segenent terns Identification of operating segments in AASB 8 Qperating Segments adopts a rules-based approach, while its predecessor AASB 114 Segment Reporting adopts a ‘principles-based’ approach. FALSE Chapter - Chapter 2426 Ditty: Easy Section: 2402 An introduction to AASB §10. For a segment to be reportable, AASB 8 requires that majority of revenues be earned from external parties and the segment satisfies one of the three quantitative thresholds. TRUE chapter - Chapter 2427 Dil oxy ‘Seaton’ 2404 Dtning a reportable sernent Research has shown that companies only provide segment information when it is required by accounting regulation. FALSE Chapter - Chapter 2428 Dict oxy Secon 24.01 Advantages and dscvantagesof segment reporting Segment information may be useful to investors who wish to use ethical guidelines about which industries or countries they invest in. TRUE chapter - Chapter 2428 Ditty: Easy Section 2401 Advantages and disadvantages of segment reporting Management may be concerned that segment reporting will put the entity at competitive disadvantage, so it has been suggested that it can avoid providing accurate segment reports through opportunistic interpretation of the definition of a business segment. TRUE Chapter - Chapter 242416 Ditty: Easy11 12 B Section: 24.01 Advantages and disadvantages of segment reporting IFRS 8 was issued as part of the ongoing process to converge IASB standards with the US accounting standards. TRUE chapter - Chapter 24011 Ditty: Easy Section: 2402 An introduction to AASB § AASB 8 identifies five factors that are to be considered in determining whether or not products and services are related for the purposes of defining a business segment. It further specifies that the products and services included in a business segment must be similar with respect to all these factors. FALSE Chapter - Chapter 242812 Ditty: Medurn Section 24.05 Measurement of segenent terns A geographical segment is defined in part by AASB 8 as being a distinguishable component of an entity engaged in providing products and services within a particular social and cultural environment. FALSE Chapter - Chapter 242813 Ditty: Medurn Section: 2408 Non-financial disclosures14, 15, 16. 17 AASB 8 specifies that a geographical segment cannot include more than two countries: FALSE Chapter - Chapter 242818 Ditty: Easy Section: 2408 Non-financial disclosures AASB 8 specifies guidelines regarding whether or not a segment is reportable. These guidelines are known as the 10 per cent rules. All three rules are required to be met in order to establish a reportable segment. FALSE Chapter - Chapter 24215 Ditty: Easy Section: 2404 Defining a reportable segrnent AASB 8 allows reportable segments to be combined as a single operating segment if: (a) they exhibit similar long-term financial performance; and (b) they are similar in all of the appropriate factors identified in the standard in relation to segment revenues, expenses, assets and liabilities. Chapter - Chapter 242216 Ditty: Medurn Section: 2404 Defining a reportable segrnent AASB 8 does not require disclosure of a reportable segment if a segment is mainly transacting with related parties. TRUE chapter chapter 24281718, 19, 20, Ditcuty: Easy Section: 24.06 Required fancil disclosures ‘AASB 8 bans the disclosure of segments that do not pass the '10 per cent test’ FALSE Chapter - Chapter 242818 Ditty: Easy Section: 2404 Defining a reportable segrnent Legal entities often combine to form an economic entity. TRUE Chapter - Chapter 242818 Ditty: Easy Section 2401 Advantages and disadvantages of segment reporting The consolidated statement of comprehensive income provides an indication of the aggregated financial performance of many dissimilar entities. TRUE chapter Chapter 24 #26 Ditty: Easy Section 2401 Advantages and disadvantages of segment reporting24 22, An important argument for providing segmental information in the financial reports is: A Itis simpler and easier for users to follow. B, Consolidated information is so aggregated that it may disguise poor performance and very good performance among segments of the entity. C. The shareholders of the individual companies in the group can use the segment information to assess the performance of their company. D. The segments of the entity will be taxed separately on their earnings. Chapter - Chapter 24221 Ditty: Easy Section 2401 Advantages and disadvantages of segment reporting Managers may choose to provide segment data voluntarily because A, They want to highlight the companies in the group that are doing well B. Managers generally do not believe that consolidated accounts are meaningful A The segment information will demonstrate more accurately where they have done well and where they have done badly. Ip . It demonstrates a greater level of accountability that may attract investment funds chapter Chapter 24 822 Ditty: Easy Section 2401 Advantages and disadvantages of segment reporting23, 24, Situations in which aggregated data may be sufficient to evaluate the performance of an entity include: A. where the entity has not existed for a long period of time B, where the segments of the entity have highly correlated profit prospects. C. where the entity has a large consolidated asset base. D. where the entity operates in different geographic areas with different risks chupter- Chapter 24223 Ditty: Easy Section 2401 Advantages and disadvantages of segment reporting In the situation where an entity has invested in segments that are diverse: A, Segment information should enable the users of the financial statements to better predict the future profitability of the entity. 8. Segment information should enable the users of the financial statements to better predict the risk exposure of the entity. C. Segment information is less useful because according to portfolio theory investments that are not correlated reduce the risk of an entity. D, Segment information should enable the users of the financial statements to better predict the future profitability of the entity and enable the users of the financial statements to better predict the risk exposure of the entity. chapter - Chapter 24224 Ditty: Easy Section 2401 Advantages and disadvantages of segment reporting25, 26. Potential costs of providing segment information include ‘A. management taking extra risks in order to attempt to generate increased returns in its segment. 8. allowing current or potential investors to identify that the entity is earning high profits in a segment. C. disclosing that a segment is making a loss, which may lead to take-over bids by other organisations. D, allowing current or potential competitors to identify that the entity is earning high profits in a segment, which may increase competition through new entrants or an attempt to replicate the factors leading to the entity's success. Chapter Chapter 24 #25 Ditty: Easy Section 2401 Advantages and disadvantages of segment reporting An operating segment is defined by AASB 8 as: A. acomponent of an entity that is of separable and identifiable interest to a section of stakeholders of the entity. B, a distinguishable component of an entity and that component is engaged in providing an individual product or service or group of related products or services and is subject to risks and returns that are different from those of other distinguishable components of the entity C. an identifiable component of an entity that is engaged in providing an individual product or service to other entities within the group and is subject to special risks and returns as a result of relying on other components of the entity. D. an identifiable component of an entity based on functional relationships with suppliers or customers or financiers established over a period of time. chapter Chapter 24 92627. 28, Ditcuty: Easy Section: 2402 An introduction to AASB § The guidelines to determine that a segment is reportable in accordance with AASB 8 Qperating Segments includes A, The segment's assets are equal to or greater than 10 per cent of the entity's total assets. B. The expenses of the segment that relate to external sales are equal to or greater than 10 per cent of total segment expenses. C. The segment's assets are 10 per cent or more of the combined assets of all operating segments. D. The expenses of the segment that relate to external and internal sales are equal to or greater than 10 per cent of total segment expenses Chapter - Chapter 2427 Ditty: Medurn Section: 2404 Defining a reportable segrnent AASB 8 identifies a number of purposes for segment data. These include to: A. enhance understandability of the information. 8. achieve comparability with other entities. C. provide relevant and reliable information to users about product/service-related risks and returns. D. all of the given answers chapter Chapter 24 828 Ditty: Easy Section: 2404 Defining a reportable segrnent29, 30, The guidelines to determine that a segment is reportable in accordance with AASB 8 Qperating Segments includes A. The segment's external revenue is equal to or greater than 10 per cent of the external sales of all operating segments 8. The expenses of the segment that relate to external sales are equal to or greater than 10 per cent of total segment expenses C. The segment's reported revenue, including both 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. D. The expenses of the segment that relate to external sales are equal to or greater than 10 per cent of total segment expenses, and the segment’s revenues are 10 per cent or more of the total segment revenues. chapter Chapter 24 826 Difieuty: Medurn Section: 2404 Defining a reportable segrnent According to AASB 8, factors to be considered in aggregating operating segments include: A. a similar production process. 8. exchange control regulations C a common communications network. D. a similar regulatory environment. Chopter- chapter 24.836 Ditty: Easy Section: 2404 Defining a reportable segrnent31 The guidelines to determine that a segment is reportable in accordance with AASB 8 Qperating Segments includes A. The segments reported revenue, including external customers and intersegment sales or transfers, is 10 per cent or more of the combined revenue, internal and external, of all operating segments. 8. The segment's reported profit or loss is 10 per cent or more of the greater, in absolute amount, of () 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. A The segment's assets are 10 per cent or more of the combined assets of all operating segments. Il of the given answers are correct Chapter - Chapter 24231 Ditty: Medurn Section: 2404 Defining a reportable segrnent32, 33, Which of the following characteristics of a segment is not considered reportable in AASB 8 Qperating Segments? A. Reported revenue, both external and internal, is 10 per cent or more of the combined revenue, both external and internal of all operating segments. 8. The absolute amount of its reported profit or lossis 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 C. Assets are 10 per cent or more of the combined assets of all operating segments D. Operating segments that do not meet any of the quantitative thresholds, but management believes that information about the segment would be useful to users of the financial statements, chapter Chapter 24832 Difieuty: Medurn Section: 2404 Defining a reportable segrnent In AASB 8 Qperating Segments, which of the following is not a consideration in determining the operating segments of an entity? A business activities from which an entity may earn revenues and incur expenses 8. component of an entity whose operating results are regularly reviewed by the entity's chief operating decision maker C. the entity's distribution and supply chain management system D. component of an entity where discrete financial information is available hupter- Chapter 24233 Ditty: Easy Section: 2403 Defining an operating segment34. The guidelines for determining that a segment is reportable in accordance with AASB 8 includes: A. The segment's equity is equal to or greater than 10 per cent of the total segment equity. B. The expenses of the segment that relate to external sales are equal to or greater than 10 per cent of total segment expenses. The segment's revenues are 10 per cent or more of the total segment revenues. D. The expenses of the segment that relate to external sales are equal to or greater than 10 per cent of total segment expenses and the segment's revenues are 10 per cent or more of the total segment revenues. chapter ~ Chapter 24834 Ditty: Easy Section: 2404 Defining a reportable segrnent35. The guidelines for determining that a segment is reportable in accordance with AASB 8 include: Its segment result, whether a profit or loss, is 10 per cent or more of the combined result of all segments that earned a profit or the combined result of all segments that incurred a loss, whichever is the greater absolute amount. 8. Its segment result, if a profit, is 10 per cent or more of the combined result of all segments that made a profit, or ifthe segment made a loss, its loss is 10 per cent or more of the absolute amount of the total segment losses. A Its segment result, whether a profit or loss, is 10 per cent or more of the absolute value of the combined results of all segments. D. Its segment result, whether a profit or loss, is 10 per cent or more of the combined result of all segments that eamed a profit or the combined result of all segments that incurred a loss, whichever is the lesser absolute amount. chapter - Chapter 24235 Difieuty: Medurn Section: 2404 Defining a reportable segrnent36. AASB 8 requires that: A Reportable segments must individually constitute less than 75 per cent of the entity's total revenues. 8. The total revenues attributable to the reportable segments must be equal to or greater than 75 per cent of the entity's total revenues. C. The total external revenues attributable to reportable segments must equal at least 75 per cent of the entity's total revenues. D. The sum of the individual reportable segment's profits or losses must be equal to or greater than 75 per cent of the entity's absolute amount of profit or loss. Chapter - Chapter 24 #36 Ditty: Easy Section: 2404 Defining a reportable segrnent37. The following segment information relates to Tolkein Enterprises Business segment Segment revenue ($000) External Total Industrial 30 500 Project consulting 200] 200] Mechanical 900 960 Retailing 870 870 2 000} 2530} Applying the tests for identifying a reportable segment in accordance with AASB 8, which of the above segments qualify for reporting and do the segments satisfy the 75 per cent test? A. mechanical engineering and retailing, 75 per cent test satisfied; No 8. industrial manufacturing, mechanical engineering and retailing, 75 per cent test satisfied; Yes C. project consulting, mechanical engineering and retailing, 75 per cent test satisfied; Ves D. industrial manufacturing, project consulting, mechanical engineering and retailing, 75 per cent test satisfied; No Chapter - Chapter 24237 Ditty: Hara Section: 2404 Defining a reportable segrnent38. Gollum Ltd provides the following segment information: [Segment result (000) Business segment. Industrial manufacturing G0] Project consulting 740 Mechanical engineering 20 Retailing (1a) ‘Agriculture 70 Geographical segment ‘Australia 100 Pacific Islands a0 us a) There are no inter-segment sales. Which of the segments are reportable applying only the segment result test? industrial manufacturing, project consulting, retailing, agriculture; geographical segments: Australia, Pacific Islands, US. business segments: industrial manufacturing, project consulting; geographical segments: Australia. C. business segments: industrial manufacturing, project consulting, mechanical engineering, retailing, agriculture; geographical segments: Australia, Pacific Islands, US. Ig business segments: industrial manufacturing, project consulting, agriculture; geographical segments: Australia, Pacific Islands Chapter ~ Chapter 24 38 ifcuty fedra Sedion’ 2404 Defining a reportabe segrnent39. Gandulf Ltd provides the following segment information Segment result (s000) Business segment Industrial manufacturing 500 Project consulting 3 Mechanical engineering 700 Retailing 140 ‘Agriculture 70 Total 1500 Geographical segment Australia 1000 Pacific Islands 340) us 160 Total 1500] Which of the segments are reportable applying only the segment asset test? business segments: industrial manufacturing, project consulting, mechanical engineering; geographical segments: Australia, US B, business segments: industrial manufacturing, mechanical engineering; geographical segments: Australia, C. business segments: mechanical engineering; geographical segments: Australia. D. business segments: industrial manufacturing, project consulting, mechanical engineering, retailing, agriculture; geographical segments: Australia, US. chapter- Chapter 24235 Difcuty: Medturn Section: 2404 Defining a reportable segrnent40. 4 Segment revenues do not include: > interest earned on loans to other segments interest or dividend income, unless the segment's operations are primarily of a financial nature. C. joint venturer's revenues from its share of joint venture operations. D. interest eared on loans to other segments and interest or dividend income, unless the segment's operations are primarily of a financial nature. chapter - Chapter 24246 Ditty: Easy Section: 24.06 Required fhancil disclosures Segment expenses do not include ‘A. joint venturer's expenses relating to the operation of joint venture operations. 8, losses on sales of investments or extinguishment of debt unless the segment's operations are primarily financial in nature C. income tax expense. D, losses on sales of investments or extinguishment of debt unless the segment's operations are primarily financial in nature and before income tax expense chapter -Chaper 24241 Ditty: Easy Section 24.05 Measurement of segenent terns42. 43. According to AASB 8 segment assets are A, the net value of assets that are directly employed by a segment in its activities. 8. the gross value of assets attributable to the segment plus any share of centrally held assets that contribute to segment activities indirectly. A the current assets that constitute the working capital of the segment and are used directly in its activities plus any non-current assets specifically held for the purpose identified as the segment's business or geographical activity. D, required to be disclosed by way of an explanation of how the assets are measured for each reportable item. chapter Chapter 24842 Ditty: Medurn Section: 2402 An introduction to AASB § AASB 8 is more’ rules based. > cost based. a principles based >. profit based. chapter - Chapter 241043 Ditty: Easy Section: 2402 An introduction to AASB §45. AASB 8 requires entities to disclose information to enable users of its financial statements to: ‘A. ensure management is using the resources efficiently. B, evaluate the nature and financial effects of the business activities the entity is engaged in C better understand the geographical areas. D. determine the liabilities relating to finance leases. chapter- Chapter 24244 Ditty: Easy Section: 2402 An introduction to AASB § AASB 8 requires: A. the segments to be identified as business segments or geographical segments. B, the amount reported for each operating segment item to be the measure reported to the chief operating decision maker. C the reporting entity to determine its primary reporting format. D. the segments to be based on the location of assets or location of customers. Chapter - chapter 24.845 Ditty: Medurn Section: 2402 An introduction to AASB §46. 47. AASB 8 requires a number of reconciliations to be presented, including: A. total reportable segment financial expenses reconciled to total entity financial expenses. 8. total reportable segment revenues reconciled to total entity revenues total reportable segment assets reconciled to total entity assets. D. total reportable segment revenues reconciled to total entity revenues and total segment assets reconciled to total entity assets. chapter - Chapter 24846 Ditty: Easy Section 24.07 Reconcilation of segment information to financial saternents AASB 8 requires reconciliation of reported segments’ amounts to the entity's reported amount for which of the following items? > dividend income expenses C. depreciation 9 . liabilities chapter Chapter 24 47 Ditty: Easy Section 24.07 Reconcilation of segment information to financial staternents48. The following segment information is presented for Hobbit Ltd Pucca Segment revenue Segment result Segment assets (s000) (000) (000) Retailing 2 000) 950) 14 500) Light manufacturing 300 ca) 2000 Mining 800] (670)| 3000 Marine transport 5 900] 1870 15 060 General insurance 400 85] 440 Total 70 000 2276 36 000 Which segments are reportable according to the guidelines provided in AASB 8? retailing, light manufacturing, mining, marine transport, general insurance retailing, marine transport light manufacturing, mining, marine transport, general insurance D. retailing, mining, marine transport chapter Chapter 2448 ily: Hara Seion: 2404 Del able segrnent49. The following information is provided for Gandalf Ltd: Pucca Segment revenue Segment result Segment assets ($000) (000) (000) Retailing 200 80] 3000 Light manufacturing 7660} (2600) 2500] Mining 700] 250) 1 000) Marine transport 3700 946 6 000 General insurance 2 320] 1175) 2500] Total 3470 a0} 7 000 Which segments are reportable according to the guidelines provided in AASB 8? A. retailing, marine transport, general insurance 8. retalling, heavy manufacturing, marine transport, general insurance retailing, light manufacturing, marine transport, general insurance D. retailing, light manufacturing, mining, marine transport, general insurance chapter - Chapter 2445 Ditty: Hara Seion: 2404 Del 1g a reportable segrnent50. According to AASB 8, ‘where total external revenues attributable to reportable segments constitute less than 75 per cent of the entity's total revenues: A. additional reportable segments must be identified in accordance with the definition of reportable segments, until at least 75 per cent of the entity's total revenues are included in reportable segments. 8. the entity reports those segments already identified as reportable, even though they constitute less than 75 per cent of the entity's total revenues. dditional segments must be identified as reportable segments, even if they do not qualify as reportable segments, until at least 75 per cent of the entity's total revenues are included in reportable segments D. the entity considers whether total external revenues attributable to reportable segments constitute greater than 75 per cent of the entity's total external revenues, and if so, report those segments already identified. chapter Chapter 24 56 Difieuty: Medurn51. Consider the following list of operating segments and segment results for the current reporting period relating to Legolas Ltd, and answer the question below. Operating segment a ieaes. Paper products 317 000 Office products (750 000) Publishing 7 Multimedia (880 000)| Other operations 76 000 What is the minimum loss (rounded to the nearest $1000) that the publishing segment could have made for that segment to be considered a reportable segment according to AASB 8? A. ($39 000) B. ($114 000) C. ($103 000) D. ($142 000) Chapter Chapter 24225) Ditty: Medurn Section’ 2404 Definin table segrnent52. Consider the following list of operating segments and segment assets for the current reporting period relating to Arwen Ltd, and answer the question below. Clothing 250 000] Household 350 000 Fast food | Multimedia 880 000] Other operations 175 000] What is the minimum asset amount (rounded to the nearest $1000) that the fast food segment should have for that segment to be considered a reportable segment according to AASB 8? A. $83 000 B. $106 000 c. $174 000 D. $184 000 chapter - Chapter 24 #52 Ditty: Medurn Section’ 2404 Definin table segrnent53The following information relates to Aragorn Ltd and its Mordor segment: 2011 2012 2013 2014 0008) ‘All Aragorn Ltd operating segments Liabilities 500 650 700 750 Equity 200 220 250 230 Revenue: Other segments 500 550 550 570 Extemal 800 850 850 870| Mordor Liabilities 50 55 65 65] Equity B 5 30 20 Revenue: Other segments 5 5 70 70 Extemal 70 70 7 70 In which years would the Mordor segment be classified as a reportable segment according to AASB 8? 2011, 2013 and 2015 B, 2011, 2012, 2013 and 2015 2012, 2013, 2014 and 2015 2013 and 201554, 55. In accordance with AASB 8 an operating segment is a component of an entity: A. that engages in business activities from which it may earn revenues and incur expenses. 8. whose operating results are regularly reviewed by the entity's chief operating decision maker to make decisions about resources to be allocated to the segment and asses its performance. C. for which discrete financial information is available D. All of the given answers are correct chapter - Chapter 24254 Ditty: Medurn Section: 2402 An introduction to AASB § Information about operating segments that do not meet any of the quantitative thresholds: A. should be ignored. B. shall be combined and disclosed in an ‘all other segments’ category. C. should be combined with other segments that exhibit similar economic characteristics. D. All of the given answers are correct. chapter Chapter 24.855 Difieuty: Medurn Section: 2404 Defining a reportable segrnent56The following information relates to Al Industrials Ltd and its operating segment (in $'000s): Retail Agriculture Brewing Chemicals | Transport T ‘Segment revenues Extemal a) 1500 320) 25 100 Other segments 750 200) 28 a a0 Segment results 220 127 G0] (350) 20] Segment assets 360 260 50 50 51 Which operating segments are considered to be reportable under AASB 8 using the segrnent revenue qualitative threshold? A. all segments B, retail and agriculture C. retail, agriculture and brewing D. retail, agriculture and chemicals chapter Chapter 24 256 Setion: 24.04 Def57The following information relates to All Industrials Ltd and its operating segment (in $'000s): Retail Agriculture Brewing Chemicals ] Transport T (Segment revenues Extemal 1100 1500 320 25 100 Other segments 150 200 28 gy 0 Segment results 220 127 (30) (50)] 20] [Segment assets 360 260} 50 50 51 Which operating segments are considered to be reportable under AASB 8 using the absolute amount of its reported profit or loss qualitative threshold? A. all segments 8. retail and agriculture C. retail, agriculture and brewing D. retail, agriculture and chemicals Chapter - Chapter 24257 Setion: 24.04 Def58The following information relates to Al Industrials Ltd and its operating segment (in $'000s): Retail Agriculture Brewing Chemicals | Transport T ‘Segment revenues Extemal a) 1500 320) 25 100 Other segments 750 200 28 a a0 Segment results 220 127 G0] (350) 20] Segment assets 360 260 50 50 51 Which operating segments are considered to be reportable under AASB 8 using the segment asset qualitative threshold? A. all segments Ip retail and agriculture C. retail, agriculture and brewing D. retail, agriculture and chemicals Setion: 24.04 Def 59. Which of the following is notlikely to be a ‘chief operating decision maker’ as referred to in AASB 8 Qperating Segments? A. executive committee of the board 8. chief executive officer C. chief operating officer D. chief accountant chapter ~ Chapter 24 #5860, Ditty: Mediuen Section: 2403 Defining an operating segment In accordance with AASB 8 Qperating Segments, which of the following statements is incorrect) A. Ifthe total external revenue reported by operating segments constitutes less than 75 per cent of the entity's revenue, additional operating segments shall be identified as reportable segments until at least 75 per cent of the entity's revenue is included in reportable segments. 8. Operating segments that are not reportable are combined and disclosed as part of ‘all other segments’ C. Ifmanagement judges that an operating segment identified as a reportable segment in the immediately preceding period is of continuing significance, information about that segment shall continue to be reported separately in the current period even if it no longer meets the criteria for a reportable segment. D, Identification of operating segments in AASB 8 Qperating Segments adopts a ‘rules-based! approach, while its predecessor AASB 114 Segment Reporting adopted a ‘principles-based' approach chapter Chapter 24 #66 Difieuty: Medurn Section: 2404 Defining a reportable segrnent61 In accordance with AASB 8 Qperating Segments, which of the following statements is incorrect) A, The standard requires an entity to report financial and descriptive information about its reportable segments. B. Reportable segments are operating segments or aggregations of operating segments that meet specified criteria A The standard requires an entity to report a measure of operating segment profit or loss and of segment assets. Ip ). Reportable segments exclude business activities for which it has yet to earn revenues (e.g. start-up operations). chapter - Chapter 2426) Ditty: Medurn Section: 2404 Defining a reportable segrnent62, The following information relates to Gimli Ltd and its Elrond segment 2011 2012 2013 2014 2015 000s) ‘All Gimli Ltd operating segments Liabilities 500 600 700 700 300 Equity, 200 200 250 300] 300) Revenue 1300 1300 1300 1300 1300 Profit (loss) Profiemaking 130 150 30 110 120 Loss-making GO| GO] 20] GO| GO] Elrond segment Liabilities 0 50 50 a0 a Equity 20 20 20 0 20 Revenue 100 135) 115) 140 105) Profit (0s) 70} 75 el 75 70} In accordance with AASB 8 Qperating Segments in which years is the Elrond segment a reportable segment? 2011, 2012 and 2013, B, 2012, 2013 and 2014 2012 and 2014 >. 2011 and 2015 Sedion 24063. The following information relates to Baggins Ltd and its Bilbo segment 2011 2012 2013 2014 2015 000s) ‘All Baggins Ltd operating segments Assets 2000 2200 2260 2 800 3000] Revenue 2 300 2 300 1 800) 2 400) 2700 Profit (oss) Profit-making 400 450 390) 510) 520] Loss-making a) (200) (220) G0] G0] Bilbo segment Aesets 180 200} 300} 300} 280 Revenue 200 135) 150 220 210 Profit (loss) @l (0) a0 60 0 In accordance with AASB 8 Qperating Segments in which years is the Bilbo segment a reportable? 2011, 2012 and 2013, 2012, 2013 and 2014 2011 and 2012 D, 2013 and 2014 Sedion 24064. The following information relates to Sam Ltd and its Eomer segment 2011 2012 2013 2014 2015 S000s) ‘All Sam Ltd operating segments Assets 5 000 5 200 5280 5 800 5000 Revenue 4 300) 4 300] 4800) 4 400) 3700 Proft (oss) Profit-making 500) 400 490 510) 420 Loss-making (200) (a0) (220) (150) en) Eomer segment Aesets 180 20} 300} 300} 280 Revenue 200 135) 110) 230 210 Profit (loss) 20) (0) a0 60 20 In accordance with AASB 8 Qperating Segments in which years is the Eomer segment a reportable segment? A. 2011, 2012 and 2013 B, 2011, 2014 and 2015 2011 and 2014 D, 2012 and 2013 Sedion 24065, 66. One of the advantages of AASB segment reporting is? A. all segments are reportable 8. provides full disclosure of the entity's activities highlights the performance of the different entity activities D. increased rules based reporting chapter - Chapter 2465 ical edn Secon 2401 Advantages and dscvantagesof segment reporting Edwards and Smith (1996) found that one of the main reasons companies resisted segment disclosures is: A. There are unreasonable costs to prepare disclosures B. Investors were not interested in additional information. © The financial report had sufficient information for users. D. It means a competitive disadvantage. Chopter- chapter 24-266 Difieuty: Medurn Section 2401 Advantages and disadvantages of segment reporting67. 68, 69, AASB 8 requires reconciliation of reported segments’ amounts to the entity's reported amount for which of the following items? A. dividend income 8. expenses C. depreciation D. revenues chapter Chapter 24267 Ditty: Medurn Section 24.07 Reconcilaion of segment information to financial saternents AASB 8 requires which of the following information to be disclosed about major customers? A. customer identity B. revenues when greater that 10 per cent of an entity's revenue C. amount of revenues for each segment D. revenue history Chapter- chapter 24.268 Difiaty: Meda Section: 24.08 Non-tnanca doses Discuss the advantages and disadvantages to the users and preparers of financial reports of disclosing segment data chapter - Chapter 24 #65 Ditty: Medurn Section 2401 Advantages and disadvantages of segment reporting70. What is the rationale for including a final threshold test where entities are required to include in their reportable segment at least 75 per cent of the entity's total external revenues? What action must an entity take if this threshold is not achieved? AASB 8 requires a specific proportion of an entity's total revenue to be attributed to operating segments. Specifically, paragraph 15 requires: /f the total external revenue reported by operating segments constitutes less than 75 per cent of the entity's revenue, additional operating segments shall be identified as reportable segments (even if they do not meet the criteria in paragraph 13) until at least 75 per cent of the entity's revenue is included in reportable segments. The rationale for the above requirement is that in order to provide adequate insight into an entity's operations, reportable segments should represent a substantial proportion of the entity's total operations. In this regard, identification by the entity of sufficient segments so that the total revenues of all reported segments constitute 75 per cent or more of the entity's revenues might help ensure that the reported segments constitute a substantial proportion of the entity's total operations. Because some organisations might have a large number of smaller operating segments that might not warrant separate disclosure (perhaps on the basis of materiality), such segments are required to be combined and disclosed together. As paragraph 16 of AASB 8 states: /nformation about other business activities and operating segments that are not reportable shall be combined and disclosed in an ‘all other segments’ category separately from other reconciling items in the reconciliations required by paragraph 28. The sources of the revenue included in the ‘all other segments' category shall be described. For more information refer to ‘Defining a reportable segment’ Chapter - Chapter 24276 Ditty: Hara Section: 2404 Defining a reportable segment71. In addition to financial information disclosures, AASB 8 also requires disclosure of non-financial information. Discuss what non-financial disclosures related to segment reporting are required under AASB 8 and the rationale for these disclosures. Chapter ~ Chapter 24.271 Ditty: Medurn Section: 2408 Non-financial disclosures 72. Discuss the specific financial information items that must be disclosed in relation to segment reporting. Chapter - Chapter 24272 Ditty: Medurn Section: 24.06 Required fhancil disclosures 73. Discuss the reasons for the release of IFRS 8. Chapter - Chapter 24273 Ditty: Medurn Section: 2402 An introduction to AASB §74, Discuss the concerns raised about competitive disadvantage to the reporting entity in providing disclosures on operating segments. Some organisations opposed detailed segment disclosures on the ground that competitors might use an entity's segment information to undermine its profitability—perhaps by targeting segments that appear to be particularly profitable. Would the required disclosures create significant problems for an entity in terms of the divulgence of valuable information that could be utilised by competitors? In addressing concerns about competitive disadvantage it should be appreciated that competitors have many sources of detailed information about an organisation other than the financial statements. Further, the information that is required to be disclosed about an operating segment is no more detailed or specific than the information typically provided by a smaller organisation with a single operation. There are also issues of accountability. Arguably, many users—particularly shareholders—have a right to specific financial information about operating segments, as well as the entity-wide information (geographical, product-related, and reliance on major customers) required by AASB 8 For more information refer to ‘Is there a case for competitive harm?" chapter Chapter 24 #74 Difieuty: Medurn Setion’ 2409s there a case for competitive harm?75. 76. Discuss the issues involved in allowing management to determine the basis of measurement for operating segments. Allowing management to determine the basis of measurement to be used for the purposes of segment disclosures raises some issues about relevance versus representational faithfulness. As we know from Chapter 2, two important qualitative characteristics of financial information are relevance and representational faithfulness—both of which are clearly important. In relation to possible trade-offs between the relevance and the representational faithfulness (although the Basis for Conclusions refers to reliability) of segment disclosures, paragraph 86 of the Basis for Conclusions released with SFAS 131 comments that ‘it is apparent that users are willing to trade a degree of reliability in segment information for more relevant information’ While entities are required to provide segment disclosures based on the measures utilised internally, some accompanying explanation is required to assist users of financial statements to understand the basis of the measurements used. Specifically, paragraph 27 of AASB 8 sets out the requirements. For more information refer to ‘Measurement of segment items. Chapter - Chapter 24275 Ditty: Medurn Section 24.05 Measurement of segenent terns Explain the reconciliation information AASB 8 requires for segment reporting. Chapter - Chapter 24276 Ditty: Medurn Seation 24.07 Reconcilation of segment information to financial saternents77. Discuss the entity-wide disclosures in AASB 8 that need to been made about major customers. Paragraph 34 of AASB 8 requires entity-wide disclosures to be made about major customers. It states: An entity shall provide information about the extent of its rellance on its major customers. If revenues from transactions with a single external customer amount to 10 per cent or more of an entity's revenues, the entity shall disclose that fact the total amount of revenues trom each such customer, and the identity of the segment or segments reporting the revenues. The entity need not disclose the identity of a major customer or the amount of revenues that each segment reports from that customer. For the purposes of this standard, a group of entities known to a reporting entity to be under common control shall be considered a single customer, and a government (national state, provincial, territorial local or foreign) and entities known to the reporting entity to be under the control of that government shall be considered a single customer. In assessing this, the reporting entity shall consider the extent of econornic integration between those entities. For more information refer to ‘Non-financial disclosures’ Chapter - Chapter 24277 Ditty: Medurn Section: 2408 Non-financial disclosures