Question

A threshold used in measuring an operating segment would include:

A) The amount of its reported profit or loss is 10 percent or more of the company’s net income or loss.

B) The amount of its reported profit is 10 percent or more of the company’s net income, and only profitable segments must be considered.

C) The absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount, of either: 1) The combined reported profit of all operating segments that did not report a loss or 2) The combined reported loss of all operating segments that did report a loss.

D) The amount of its profit or loss is not a factor in determining whether the operating segment needs to be separately reported. Only revenue and assets are tested.

Answer 1

Segment Accounting - IFRS-8 disclose about detail discussion on Segment Accounting model .

This Standard help user to understand financial in a better way with much more information in details .

1. The amount of its reported profit or loss is 10 percent or more of the company’s net income or loss.-
2. The amount of its reported profit is 10 percent or more of the company’s net income, and only profitable segments must be considered.
3. The absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount, of either: 1) The combined reported profit of all operating segments that did not report a loss or 2) The combined reported loss of all operating segments that did report a loss.
4. The amount of its profit or loss is not a factor in determining whether the operating segment needs to be separately reported. Only revenue and assets are tested.

As per Standard – GAAP – at the time of determination of report able  Segment , We need to consider any one of following Three :

1. Revenue basis ( consider External + Internal Sales) >=10% of the combined revenue
2. Asset basis ->=10% of combined assets of all operating Segments
3. Profit /loss basis = The absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount, of either: 1) The combined reported profit of all operating segments that did not report a loss or 2) The combined reported loss of all operating segments that did report a loss.

On the above definition , it is quite clear that Point Number 3 ( as mentioned in the Question ) is to be treated as correct Threshold to determine Operating Segment