1: reportable operating segments

According to GAAP, companies that have publicly traded debt or equity instruments must report
on their business segments.
‫ يجب على الشركات التي قامت بالتداول العام في أدوات الدين أو حقوق الملكية تقديم تقارير عن قطاعات‬، GAAP ‫وفقًا لمبادئ‬
.‫أعمالها‬

Reporting is based on the structure used by management to make decisions or evaluate

performance.
.‫يعتمد إعداد التقارير على الهيكل الذي تستخدمه اإلدارة التخاذ القرارات أو تقييم األداء‬
For example,
 if the company’s internal reporting and evaluation system is geographically based, the
segment reporting is geographically based.
.‫ فإن إعداد التقارير القطاعية يكون على أساس جغرافي‬، ‫إذا كان نظام التقارير والتقييم الداخلي للشركة قائ ًم ا على أساس جغرافي‬

 if the internal reporting and evaluation system is product-line based, the segment
reporting is product-line based.
.‫ فإن اإلبالغ عن القطاع يعتمد على خط اإلنتاج‬، ‫إذا كان نظام التقارير الداخلية والتقييم يعتمد على خط اإلنتاج‬

 Operating Segment (def.)

A component of a business enterprise ‫أحد مكونات مشروع تجاري‬
1. Engages in business activities ‫يشارك في األنشطة التجارية‬
 Revenues and expenses tracked ‫تتبع اإليرادات والمصروفات‬
 Intercompany amounts included ‫تم تضمين المبالغ بين الشركات الشقيقة‬
2. Operating results are reviewed by chief operating decision maker
‫تتم مراجعة نتائج التشغيل من قبل صانع قرار التشغيل الرئيسي‬
3. Discrete financial information is available ‫تتوفر معلومات مالية منفصلة‬

Excludes pension and post-retirement plans, and general corporate headquarters

‫يستثنى من ذلك خطط المعاشات التقاعدية وما بعد التقاعد والمقار العامة للشركة‬

 Combining Segments
Segments with similar economic characteristics may be combined.
.‫يمكن دمج القطاعات ذات الخصائص االقتصادية المتشابهة‬
 Products and services ‫منتجات وخدمات‬
 Production processes ‫عمليات االنتاج‬
 Classes of customers ‫فئات العمالء‬
 Distribution systems ‫أنظمة التوزيع‬
 Regulatory environment, if applicable ‫ إن وجدت‬، ‫البيئة التنظيمية‬

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2: Threshold tests ‫اختبارات الحد‬
 Reportable Segments ‫القطاعات التي يمكن اإلبالغ عنها‬
Operating segments are reportable and material if any one of the three threshold
tests are met ‫يتم اإلبالغ عن قطاعات التشغيل والمواد إذا تم استيفاء أي من اختبارات الحد الثالثة‬
1. 10% Revenue test
2. 10% Asset test
3. 10% Profit or loss test

Segments not meeting any of the three tests are combined into one "all other"
category. ‫يتم دمج األجزاء التي ال تستوفي أيًا من االختبارات الثالثة في فئة واحدة‬

One additional test to see if a sufficient number of segments have been identified
ٍ ‫اختبار إضافي واحد لمعرفة ما إذا كان قد تم تحديد عدد كا‬
‫ف من المقاطع‬
1. 75% External revenue test

First: 10% Revenue Test

Segment reported revenue, including intersegment revenues, is 10% or more of

the combined revenue of all operating segments.
‫ او اكتر من االيرادات المجمعة لجميع القطاعات التشغيل‬%10 ‫تقرير ايرادات القطاعات يتضمن ايرادات مشتركة بين القطاعات‬
 Combined includes "all other" category
 Intersegment revenues are not eliminated so that
combined revenue may be > consolidated revenue
‫االيرادات المشتركة ال يتم استبعادها لزلك يكون االيرا\ات الممجمعه اكبر من االيرادات الموحدة‬
Example: 10% Revenue Test

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A segment is reportable if its total revenue ≥ 10% of combined segment revenue.
Threshold = 10% (1,500) = $150 ‫الحد االدنى‬
$‫ من االيرادات المجمعة‬%10 ‫يتم االبالغ عن قطاع معين داخل الشركة فى تقرير لو كانت االيرادات بتاعته اكبر من‬

Transportation ($360) and Oil refining ($885) are reportable segments

Second: 10% Asset Test

Segment assets are 10% or more of combined assets of all operating segments.
 Combined includes "all other"
 Use the segment's identifiable assets ‫بستخدم االصول المحددة للقطاع‬
 General corporate assets ‫اصول الشركة العامة‬
o May be excluded or included ‫يمكن استبعادها او تضمينها‬
o Consider organization of assets for decision- making purposes
 Combined assets of segments may be less than total corporate assets

Example: 10% Asset Test

A segment is reportable if its identifiable assets ≥ 10% of combined segment

assets.
Threshold = 10% × (3,000) = $300 ‫الحد االدنى‬
Transportation, Oil refining, and Financing are reportable segments.

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Third: 10% Profit or Loss Test

The absolute value of the segment's reportable profit or loss is 10% or more of the
greater of: ‫ أو أكثر من‬٪10 ‫ المطلقة لألرباح أو الخسائر التي يجب اإلبالغ عنها للقطاع هي‬$‫القيمة‬

1. The combined reported profit of all segments reporting profits, or

‫االرباح المجمعه لجميع القطاعات التى تقدم تقرير عن االرباح‬
2. The absolute value of the combined reported losses of all segments reporting
losses.

Operating segment profit or loss

o Is not defined by GAAP ‫لم يتم تعريفها من خالل المبادى‬
o Is based on the calculation used by management for decision making
o May include or exclude common revenues and costs

Example: 10% Profit or Loss Test

Separate profitable and unprofitable segments.

A reportable segment's |profit or loss| ≥ 10% of the greater of |combined profits

or combined losses|. $270 is greater than $100.
Threshold = 10%(270) = $27.

Transportation, Oil refining, and Finance are reportable segments.

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3: Test For Additional Segments
 75% External Revenue Test

GAAP does not specify the number of segments that must be reported; however,
the external revenue of reportable segments must be at least 75% of the total
consolidated revenue.
‫ يجب أن تكون‬، ‫ال تحدد مبادئ المحاسبة المقبولة عموما ً عدد األجزاء التي يجب اإلبالغ عنها ؛ ومع ذلك‬
.‫ على األقل من إجمالي اإليرادات الموحدة‬٪75 ‫اإليرادات الخارجية للقطاعات التي يجب اإلبالغ عنها‬
 Exclude intersegment revenues ‫بستبعد االيرادات المشتركة بين القطاعات‬
 Add other segments until the 75% test is met 75 ‫اضيف شرايح اخرى حتى يتم تحقيق‬%
 Segments are typically aggregated so that there are not more than ten
separate segments reported.
‫ قطاعات منفصلة‬10 ‫بجمع القطاعات بشكل نموزجة حتى ال يتم التبليغ عن اكتر من‬
Preliminary Segment Test Results: Example (cont.)
Based on the 10% revenues, 10% assets, 10% profit and loss tests:

Three reportable segments

 1. Transportation, 2. Oil refining , 3. Financing

One non-reportable segment which becomes "all other"

 Insurance

Now, check to see if the three are enough!

Example
Now we examine the operating segment revenue without intersegment sales data. Have
sufficient segments been identified?
 Threshold = 75% (1,000) = $750
 $360 + 405 + 140 > $750 … Yes!

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4: segment disclosures: ‫االفصاحات القطاعية‬
 Profit or loss‫الربح او الخسارة‬
 Total assets ‫اجمالى االصول‬
 Revenue from external customers ‫االيرادات من العمالء الخارجيين‬
 Revenue from other operating segments‫االيرادات من قطاعات التشغيل االخرى‬
 Interest income and expense ‫االيردات و المصروفات‬
 Depreciation and amortization expense ‫مصاريف االهالك واالستهالك‬
 Unusual items‫عناصر غير عادية‬
 Income from equity method investments ‫الربح من استثمارات راس مالية‬
 Income tax expense or benefit
 Extraordinary items ‫عناصر غير عادية مثل الزالزل والبراكين‬
 Significant noncash items other than depreciation

Remember:
GAAP is depending on the company’s chief operating decision maker to determine the most
useful information.
.‫تعتمد مبادئ المحاسبة المقبولة عموما ً على صانع القرار التشغيلي الرئيسي للشركة لتحديد المعلومات األكثر فائدة‬

Whatever data is required internally will also be used for external disclosures. However, the
company allocating expenses among the operating segments should be continued for external
segment disclosure purposes.
ً ‫ فسيتم أي‬، ‫مهما كانت البيانات المطلوبة داخليًا‬
‫ يجب أن تستمر‬، ‫ ومع ذلك‬.‫ضا استخدامها في عمليات اإلفصاح الخارجية‬
.‫الشركة التي تخصص المصروفات بين قطاعات التشغيل ألغراض اإلفصاح عن القطاعات الخارجية‬

Additional Disclosures
Additional enterprise-wide disclosures are required if not already reported with segment
information ‫مطلوب إفصاحات إضافية على مستوى المؤسسة إذا لم يتم اإلبالغ عنها بالفعل مع معلومات القطاع‬
1. Products and services
 Revenues by product/product line, service ‫ الخدمة‬، ‫ خط اإلنتاج‬/ ‫اإليرادات حسب المنتج‬
2. Geographic information
 Revenues and fixed assets ‫اإليرادات واألصول الثابتة‬
 Domestic and foreign ‫المحلية واألجنبية‬
 And if >10%, the specific country must be disclosed‫يجب اإلفصاح عن الدولة المحددة‬
3. Major customers ‫كبار العمالء‬
 Customer revenues > 10% Total Revenues ‫ إجمالي اإليرادات‬٪10 >‫إيرادات العمالء‬
 Segment which has those revenues ‫الجزء الذي له تلك اإليرادات‬
 Not required: customer identity ‫ هوية العميل‬:‫غير مطلوب‬

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E 15-1 Segment disclosures

1. The disclosure requirements for an operating segment do not include:

a. Unusual items b. Income tax expense or benefit
c. Interest revenue d. Cost of goods or services sold

2. A reconciliation between the numbers disclosed in operating segments and consolidated

numbers need not be provided for:
a. Cost of goods sold b. Profit or loss
c. Net assets d. Revenues

3. Each reportable segment is required to disclose the following information except for:
a. Unusual items b. Depreciation, depletion, and amortization
c. Capital expenditures d. Gross profit or loss

4. An enterprise is required to disclose information about its major customers if 10 percent or

more of its revenue is derived from any single customer. This disclosure must include:
a. The products or services generating the revenue from such sales
b. The operating segment or segments making such sales and the total revenue from
the customer
c. The name of the customer to whom the sales were made
d. The dollar amounts of revenue and any profit or loss on the sales

5. Which of the following is not a criterion for aggregating two or more operating segments?
a. The segments should have similar products or services.
b. The segments should have similar production processes.
c. The distribution of products should be similar.
d. The segments should have similar amounts of revenue.

6. Required segment disclosures in interim-period statements do not include:

a. A measure of segment profit or loss
b. Net interest revenue
c. A description of a change in segmentation from the last annual report
d. Intersegment revenue

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E 15-5
Apply threshold tests
1. Coy Corporation and its divisions are engaged solely in manufacturing operations. The
following data (consistent with prior years’ data) pertain to the industries in which operations
were conducted for the year ended December 31, 2016 (in thousands):
Industry Total Operating Assets at
Revenue Profit December 31, 2016

A $10,000 $1,750 $20,000

B 8,000 1,400 17,500
C 6,000 1,200 12,500
D 3,000 550 7,500
E 4,250 675 7,000
F 1,500 225 3,000
$32,750 $5,800 $67,500

In its segment information for 2016, how many reportable segments does Coy have?
a. Three b. Four
c. Five d. Six

2. Hen Corporation’s revenues for the year ended December 31, 2016, are as follows (in
thousands):
 Consolidated revenue per income statement $1,200
 Intersegment sales 180
 Intersegment transfers 60
 Combined revenues of all segments $1,440
Hen has a reportable segment if that segment’s revenues exceed:
a. $6 b. $24
c. $120 d. $144

3. The following information pertains to Ari Corporation and its divisions for the year ended
December 31, 2016 (in thousands):
 Sales to unaffiliated customers $4,000
 Intersegment sales of products similar to those
sold to unaffiliated customers 1,200
 Interest earned on loans to other industry segments 80

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The intersegment interest is not reported by the divisions on internal reports reviewed by the
chief operating officer. Ari and all of its divisions are engaged solely in manufacturing
operations. Ari has a reportable segment if that segment’s revenue exceeds:
a. $528 b. $520
c. $408 d. $400

4. The following information pertains to revenue earned by Wig Company’s operating

segments for the year ended December 31, 2016:
Segment Sales to Intersegment Total
Unaffiliated Sales Revenues
Customers
Ames $ 10,000 $6,000 $ 16,000
Ames $ 10,000 $6,000 $ 16,000
Beck 16,000 8,000 24,000
Cyns 8,000 — 8,000
DG 86,000 32,000 118,000
Combined 120,000 46,000 166,000
Elimination — (46,000) (46,000)
Consolidated $120,000 — $120,000

In conformity with the revenue test, Wig reportable segments were:

a. Only DG b. Beck and DG
c. Ames, Beck, and DG d. Ames, Beck, Cyns, and DG

Use the following information in answering questions 5 and 6:

Gum Corporation, a publicly owned corporation, is subject to the requirements for segment
reporting. In its income statement for the year ended December 31, 2016, Gum reported
revenues of $50,000,000, operating expenses of $47,000,000, and net payroll costs of
$15,000,000. Gum’s combined identifiable assets of all industry segments at December 31,
2016, were $40,000,000.

5. In its 2016 financial statements, Gum should disclose major customer data if sales to any
single customer amount to at least:
a. $300,000 b. $1,500,000
c. $4,000,000 d. $5,000,000

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6. In its 2016 financial statements, if Gum is organized on an industry basis, it should disclose
foreign operations data on a specific country if revenues from that country’s operations are at
least:
a $5,000,000
b $4,700,000
c $4,000,000
d $1,500,000

7. Selected data for a segment of a business enterprise are to be separately reported in

accordance with GAAP when the revenues of the segment exceed 10 percent of the:
a. Combined net income of all segments reporting profits
b. Total revenues obtained in transactions with outsiders
c. Total revenues of all the enterprise’s operating segments
d. Total combined revenues for all segments reporting profits

8. In financial reporting of segment data, which of the following items is used in determining a
segment’s operating income?
a. Income tax expense
b. Sales to other segments
c. General corporate expense
d. Gain or loss on discontinued operations

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 TEST BANK ‫دولى‬
1) Similar operating segments may be combined if the segments have similar economic characteristics
Which one of the following is a similar economic characteristic under GAAP?
A) The segments' management teams
B) The tax reporting law sections
C) The distribution method for products or services
D) The expected rates of return and risk for the segments' productive assets

2) Which of the following conditions would not indicate that two business segments should be
classified as a single operating segment?
A) They have similar amounts of intersegment revenues or expenses.
B) They have a similar distribution method for products.
C) They have similar production processes.
D) They have similar products or services.

3) GAAP requires that segment information be reported

A) by geographics, without regard to size of the segment.
B) by geographics, without regard to industry or product-line.
C) however management organizes the enterprise into units for internal decision-making and
performance-evaluation purposes.
D) by industry or product-line, without regard to geographics.

4) GAAP requires disclosures for each reportable operating segment for each of the following, except
for
A) Revenues. B) Depreciation expense.
C) R&D expenditures. D) Extraordinary items.

5) What is the threshold for reporting a major customer?

A) 5 percent of revenues B) 5 percent of profits
C) 10 percent of revenues D) 10 percent of profits

8) For an operating segment to be considered a reporting segment under the revenue threshold, its
reported revenue must be 10% or more of
A) the combined enterprise revenues, eliminating all relevant intracompany transfers and balances.
B) the combined revenues, excluding intersegment revenues, of all operating segments.
C) the combined revenues, including intersegment revenues, of all operating segments.
D) the consolidated revenue of all operating segments.

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6) Cole Company has the following 2014 financial data:

 Consolidated revenue per income statement $800,000

 Intersegment sales 200,000
 Intersegment transfers 100,000
 Combined revenues of all segments $1,100,000

Cole Company should add segments if

A) the sum of its segments' external revenue does not exceed $600,000.
B) the sum of its segments' external revenue does not exceed $825,000.
C) the sum of its segments' revenue including intersegment revenue does not exceed $600,000.
D) the sum of its segments' revenue including intersegment revenue does not exceed $825,000.

Explanation: A) (75% of $800,000 = $600,000)

9) An enterprise has eight reporting segments. Five segments show an operating profit and three
segments show an operating loss. In determining which segments are classified as reporting segments
under the operating profits test, which of the following statements is correct?

A) The test value for all segments is 10% of consolidated net profit.

B) The test value for profitable segments is 10% or more of those segments reporting a profit,
and the test value for loss segments is 10% or more of those segments reporting a loss.

C) The test value for loss segments is 10% of the greater of (a) the absolute value of the sum of
those segments reporting losses, or (b) 10% of consolidated net profit.

D) The test value for all segments is 10% of the greater of (a) the absolute value of the sum of
those segments reporting profits, or (b) the absolute value of the sum of those segments
reporting losses.

10) Dott Corporation experienced a $100,000 extraordinary loss in the second quarter of 2014 in their
East Coast operating segment. The loss should be recognized
A) only at the consolidated report level at the end of the year.
B) entirely in the second quarter of 2014 in the East Coast operating segment.
C) in equal amounts allocated to the remaining three quarters of 2014 at the corporate level.
D) in equal amounts allocated to the remaining three quarters of 2014 of the East Coast segment.

11) Which one of the following operating segment disclosures is NOT required by GAAP?
A) Total Assets B) Equity
C) Intersegment sales D) Extraordinary items

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12) Which one of the following operating segment information items is NOT directly named by GAAP
to be reconciled to consolidated totals?
A) Assets B) Liabilities
C) Revenues D) Profit or loss

13) What is the purpose of interim reporting?

A) Provide shareholders with more timely information
B) Provide shareholders with more accurate information
C) Provide shareholders with more extensive detail about specific accounts and transactions
D) Provide shareholders with more current audited information

14) The following table is provided in the disclosures for interim reporting by Bigg Company, regarding

the location of their assets.

 United States $1,860,000

 Mexico 1,270,000
 Canada 880,000
 Brazil 440,000
 Other 50,000

Based on the table, which of the following statements is true?

A) Only the U.S. and Mexico divisions would be reportable geographic divisions.
B) The U.S., Mexico and Canada divisions would be reportable geographic divisions.
C) All geographic divisions would be reportable, except for "other."
D) All geographic divisions would be reportable.

Explanation: B) Total assets for all divisions = $4,500,000, therefore those divisions with at
least $4,500,000 × 10% or $450,000 would be considered reportable geographic divisions.

17) In general, GAAP encourages the identification of reportable segments based on the following:
A) Reported segments must account for at least 75% of all external and inter-segment sales.
B) Reported segments must ideally account for at least 75% of all sales, unless there are many
smaller divisions and separate reporting would create less clarity in reporting.
C) If there are more than 10 reportable segments, the company should consider additional
aggregation of their segments.
D) Reported segments must account for 100% of the external sales, but only 75% of external and
inter- segment sales.

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18) Sandpiper Corporation paid $120,000 for annual property taxes on January 15, 2014, and $20,000
for building repair costs on March 10, 2014. Total repair expenses for the year were estimated to be
$200,000, and are normally accrued during the year until incurred. What is the total amount of
property tax and repair expense to be reported in Sandpiper's first quarter 2014 interim income
statement?
A) $ 50,000
B) $ 80,000
C) $100,000
D) $140,000

19) The estimated taxable income for Shebill Corporation on January 1, 2014, was $80,000, $100,000,
$100,000 and $120,000, respectively, for each of the four quarters of 2014. Shebill's estimated annual
effective tax rate was 30%. During the second quarter of 2014, the estimated annual effective tax rate
was increased to 34%. Given only this information, Shebill's second quarter income tax expense was
A) $30,000.
B) $34,000.
C) $37,200.
D) $61,200.

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