Question

Which of the following statements is true according to U.S. GAAP regarding operating segment disclosure? Multiple Choice The measurement of segment profit and loss disclosure need not be similar to the measurement provided to the chlef operating decision maker Segment Information does not have to be in accordance with generally accepted accounting principles Disclosure of a major customer's identty is required Geographic area information must be disclosed in interim financial statements Immaterial items must be disclosed <Prev 4 of 25 Next > earch

Answer 1

Answer: Option 3 & 4

Disclosure of major Customer’s identity is required.

An operating segment:

is a component of an entity that A) involves in business events from which it may earn revenues and incur expenses B) whose operating results are frequently reviewed by the entity’s C.O.D.M to make decisions about resources to be allocated to the segment and evaluate it’s performance C) for which discrete financial information is accessible.

There are 4 main steps to identify operating segment:

Entities will need to:

A) Identify the CODM. B) Identify their business activities (which may not necessarily earn revenue or incur expenses). C) Determine whether discrete financial information is available for the business activities. D) Determine whether that information is regularly reviewed by the CODM.

Not all operating segments require to be independently reported. Operating segments are only needed to be reportable if they exceed quantitative thresholds.

Information on an operating segment should be separately reported if:

A)reported revenue (external and inter-segment) is 10 percent or more of the combined revenue of all operating segments;

B)the absolute amount of the segment’s reported profit or loss is 10Percent or more of the greater of

1)the combined reported profit of all operating segments that did not report a loss, and

2)the combined loss of all operating segments that reported a loss;

C)the segment’s assets are 10Percent or more of the combined assets of all operating segments. 2 or more operating segments may be merged (aggregated) and reported as one if certain conditions are satisfied.

Geographic area information must be disclosed in interim financial statement.

The requirement for segments to have like economic characteristics may be difficult to overcome when merging individual countries. It’s because the specific countries need to have similar economic conditions, exchange control regulations and underlying currency for them to have similar economic characteristics. Even when aggregation of geographic segments is permitted, IFRS 8 para 33 requires the separate disclosure of revenues and assets for each material foreign country. This disclosure permits users of the financial statements to evaluate the dependence of the entity on customers based in one country