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    Operating profit and loss test for reportable segments

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    When applying the operating profit and loss test to determine reportable segments, FASB 131 prescribes that costs assigned to an operating segment should:

    1 reflect the reporting practices of the industry.

    2 reflect the reporting practices of the company.

    3 be in harmony with international accounting standards.

    4 be restricted to direct traceable costs and widely accepted common costs.

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    Solution Preview

    The criteria is that segment are identified based on how management distinguishes between segments for internal reporting purposes. The objective is to provide external ...

    Solution Summary

    The rule is given and answer selected based on this rule.