Segment Reporting

Hazel Chinique - ACC 312

What is Segment Reporting?
Segment reporting presents disaggregated
financial information that makes up the total
income.

▰ Many large companies diversify their

operations
▰ Consolidated data may not give the full picture
▰ Investors need more information about the
different components of the firm
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 Why is Segment Reporting Used?

Segment reporting is important to protect the interests of

shareholders and investors by providing information
about the various business activities and economic
environments the firm engages with.

Allows financial statement users to better assess

performance and make more informed decisions.
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Implementing Segment Reporting
Operating segments are enterprise components which generate
their own revenues and expenses, have discrete financial
information available, and are regularly reviewed.

Segments can be aggregated if they have the same basic

characteristics:
▰ Nature of products/services
▰ Nature of production method
▰ Type or class of customer
▰ Method of distribution
▰ Nature of the regulatory environment
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Identifying Operating Segments

Segments must satisfy at least one of these quantitative thresholds:

▰ Revenue generated is >= 10% of the firm’s consolidated revenue
▰ Profit or loss generated is >= 10% of the combined profit of
operating segments that did not incur a loss OR of the combined
losses of operating segments that incurred a loss
▰ Identifiable assets are >= 10% of the combined assets of all
segments
Additionally, the segmented data must total to at least 75% of the entire
companies combined sales to unaffiliated customers.

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 Example - Walmart

Consolidated Statement of Income 6

 Example - Walmart

Segmented Report (Note 13) 7

Quick polling question!
Which of the
following could be
considered as
a”common cost”?
(Choose one of the options
below)
The salary of the Income tax expense An expansion of
firm’s president for an international corporate
(Option 1) branch headquarters
(Option 2) (Option 3)

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 Example - Walmart

Segmented Report (Note 13) 9

 Example - Walmart

Segmented Report (Note 13) 10

Segment Reporting Requirements

Reconciliations Information about Major customers

products, services,
and geographic
areas Disclose revenue from
Ensure that the totals of
customers that accounted
the different data Revenues from external
for >=10% of a segment’s
presented in the operating customers
total revenue
segments matches with the Long-lived assets and their
total data from the expenditures in the period
consolidated statements
Report for home country
and each relevant country

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Segment Reporting Requirements

General information Segment profit-and- Segment assets

about the operating loss information
segments Transaction revenue
Factors that management Depreciation/amortization Each operating segment’s
considers most significant Interest revenue/expense total assets
in determining operating Income tax
segments expense/benefit
Significant noncash items

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 Thank you!

I pledge my honor that I have abided by the Stevens Honor System.

Open to questions, comments, and anything else!