Name: Ernie Jane G.

Villanueva Date: March 12,2022

TOPIC : OPERATING SEGMENT

OBJECTIVES:

 Reportable segment- Based on Revenue test

 Reportable segment- Based on profit or loss test
 Reportable segment-Based on asset test
 Required total external revenue of reportable segment
 Additional reportable segment
 Major customer

OPERATING SEGMENT

 One productor geographical operating area of a diversified entity operating in several

different industries
 Operating segment is reportable segment (information should be reported ) if ANY of the ff.
quantitative threshold is met.
o Revenue test- Segment revenue (internal & external) is 10% or more of the
combined internal and external revenue of all operating segment

PROBLEM:

1. Mia Company provided the ff. information related to operating segments:

SEGMENT SALES TO CUSTOMER INTERSEGMENT SALES TOTAL REVENUE

One 5,000,000 3,000,000 8,000,000
Two 8,000,000 4,000,000 12,000,000
Three 4,000,000 --- 4,000,000
Four 43,000,000 16,000,000 59,000,000
Combined 60,000,000 23,000,000 83,000,000
Elimination --- (23,000,000) (23,000,000)
Consolidated 60,000,000 =--- 60,000,000
What is the total revenue that should be disclosed for the reportable segment?

ANS: 71,000,000

Solution:

total revenue 83,000,000

x 10%

8,300,000

Two and four are higher of 8,300,000 then you add that 2

o Profit or loss test-segment profit or loss is 10% or more of greater in absolute

amount of:
1. Combined profit of all segment reporting profit
 2. Combined loss of all segment reporting loss

PROBLEM

2.Starboy corporation and its division are engaged solely in manufacturing. The ff data in which
operations were conducted for the current year:

OPERATING PROFIT OR LOSS

Segment A 10,000,000 PROFIT

Segment B 2,000,000 PROFIT

Segment C 11,000,000 Loss

Segment D 3,000,000 PROFIT

Segment E 12,000,000 loss

In its segment information for the current year which is are not a reportable segments?

ANS: SEGMENT B

Solution:

PROFIT LOSS

Segment A 10,000,000 Segment C 11,000,000

Segment B 2,000,000 Segment E 12,000,000

Segment D 3,000,000 TOTAL 23,000,000

TOTAL 15,000,000

Which is higher you multiply it by 10%’

23,000,000

X 10%

2,300,000

(pag lumagpas sa 2,300,000 reportable pag hindi,not reportable)

o Asset test- segment asset are 10% or more of combined assets of all operating
segment

PROBLEM

3.Dart Company and its divisions are engaged solely in manufacturing operations. The ff industries in
which operations were conducted for the year ended December 31,2017.
Segments Total revenue operating profit identifiable asset

A 13,000,000 4,000,000 25,000,000

B 9,000,000 2,000,000 20,000,000

C 7,700,000 1,500,000 15,000,000

D 3,000,000 1,000,000 7,000,000

E 3,800,000 800,000 8,000,000

F 3,500,000 700,000 5,000,000

40,000,000 10,000,000 80,000,000

In its segment information for 2017 how many reportable operating segments does Dart have?

ANS: 5 segment

Solution:

Total revenue profit identifiable asset

40,000,000 10,000,000 80,000,000

X 10% x 10% x 10%

4,000,000 1,000,000 8,000,000

Overall Revenue Requirement

 All segments external revenue should be 75% of more of all operating segments.
 In case it does not meet the 75% threshold. Unreportable segments can be
aggregated(combined) to become reportable segment and meet the 75% threshold.
 To be aggregated, the unreportable segment should have same economic characteristics.
Majority (at least 3 of 5 ) of the ff should be met to be considered that the operating segment
has the same economic characteristics:
o Same nature of product or service
o Same production process
o Same type or class of customers
o Same marketing method or distribution method
o Same regulatory environment

PROBLEM

Reportable Segment-75% Threshold of all reportable segment

4.Master Roshi Company provided the ff. information pertaining to operating for the year ended
December 31,2015:

Total revenue 80,000,000

Sales to external customers included total revenue 30,000,000

External revenue reported by reportable operating segments must be at least what amount?

ANS: 22,500,000

Solution:

External revenue 30,000,000

X 75%

Overall threshold 22,500,000

PROBLEM

Reportable Segment- Additional Reportable segment

5.Warrior Nu has no intersegment sales and has the ff operating segments with their:

Segment Revenue Percentage

AA 2,400,000 30%

BB 1,600,000 20%

CC 1,200,000 15%

DD 720,000 9%

EE 640,000 8%

FF 560,000 7%

GG 480,000 6%

HH 400,000 5%

8,000,000 100%

Assume that segment GG and HH have similar products, similar production process, similar marking
methods and are not operating under regulated environment

Which of the segments are considered reportable segments?

ANS: AA,BB,CC,GG,HH
 Solution:

8,000,000 X 10%=8000,000 (DAPAT 800,000 UP)

AA 2,400,000 30%

BB 1,600,000 20%

CC 1,200,000 15%

TOTAL 5,200,000 65%

GG 480,000 6%

HH 400,000 5%

880,000 11%

5,200,000 PLUS 880,000 =6,080,000

Major customer

 A mor customer is defined as single external customer providing revenue amounts to

be 10% or more of an entity’s external revenue

PROBLEM

Major Customer

6.Essence Company and its divisions are engaged solely in manufacturing. The ff data pertain to the
industriesin which operations were conducted for the current year:

Segment Intersegment sales External rvenue

A 1,000,000 5,000,000

B 1,500,000 3,000,000

C 4,000,000 8,000,000

D 500,000 1,300,000

E 2,000,000 2,800,000

F 200,000 900,000

What is the minimum amount of revenue to be considered a major customer?

ANS: 2,100,000
Solution:

External revenue: 21,000,000

X 10%

2,100,000