QUESTION

An entity has the following operating segments for the year ended 30 June 2018:

Segment Revenue Profit or Assets

Loss
Internal External
RM’million RM’million RM’million RM’million
Garments 2 4.6 (3.75) 30
Machinery 4 25 9 100
Publishing 0.3 0.8 0.25 40
Office supplies 0.5 3.4 (2.1) 20
IT software 1.8 9.2 6 70
Home furnishing 2.4 13 7 90
Total 11 56 16.4 350

The entity uses 10% revenue test to identify reportable segments.

Required:

a. Apart from the 10% threshold test, MFRS 8 Operating Segments also requires
reportable segments to meet the 75% total revenue test.
Explain briefly the 75% total revenue test.

b. Based on the above information, prepare a segmental report for the entity for
the year ended 30 June 2018.
SOLUTION

a. 75% total revenue test is where the combined external revenue of the identified
reportable segments must be at least 75% of the total revenue of the entity. If the amount
is less than 75%, more segments must be identified as reportable segments even though
they fail the 10% threshold test.

b. Segmental Report

The entity uses 10% revenue test to identify reportable segments.

Segment Revenue Threshold

Internal External Total test (10%
RM’million RM’million RM’million revenue)
Garments 2 4.6 6.6 9.85%
Machinery 4 25 29 43.28%
Publishing 0.3 0.8 1.1 1.64%
Office supplies 0.5 3.4 3.9 5.82%
IT software 1.8 9.2 11 16.42%
Home furnishing 2.4 13 15.4 22.98%
Total 11 56 67

Based on the computations showed above, the reportable segments are the machinery,
IT software and Home furnishing segment since its revenue meets the 10% threshold limit.
However, Garment segment must be separately identified in order to meet the 75% total
revenue requirement.

External revenue from 3 segment = 25m + 9.2m + 13m = 47.2 million

Total revenue 67 million
% 70.45%

Therefore, by separately identified the Garment segment:

External revenue from 4 segment = 25m + 9.2m + 13m + 4.6m = 51.8 million
Total revenue 67 million
% 77.31%
Therefore, Segmental report for the entity for the year ended 30 June 2018:

Operating Machinery IT Home furnishing Garment** Others Total

segments Software
RM’million RM’million RM’million RM’million RM’million RM’million
Revenue:
External 25.0 9.2 13.0 4.6 4.2 56.0
Internal 4.0 1.8 2.4 2.0 0.8 11.0
Total 29.0 11.0 15.4 6.6 5.0 67.0
.
Result 9.0 6.0 7.0 (3.75) (1.85) 16.4

Assets 100.0 70.0 90.0 30.0 60.0 350.0