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SFAS 131 Operating Segments of an Enterprise

Explain operating segments of an enterprise. How does SFAS No. 131 define an operating segment? What thresholds must be met for an operating segment to be a reportable segment?

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Explain operating segments of an enterprise. How does SFAS No. 131 define an operating segment? What thresholds must be met for an operating segment to be a reportable segment?

Meaning of operating segment:

Operating segment means the segment of the enterprise which earn revenues for the enterprise and incur expenses for generating revenue and which is headed by the chief operating decision maker (CEO or COO) who will allocate the resources to the segment and assess the performance of the enterprise and further the financial results of that segment is available.

SFAS No; 131 define operating segments as follows:
An Operating Segment is a component of an enterprise
a) That engages in business activities from which it may earn revenue and incur expenses (including revenues and expenses relating to transactions with other components of the same enterprise).
b) Whose operating results are regularly reviewed by the enterprise's chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance and
c) For which discrete financial information is available.

If there is a segment which is yet to generate ...

Solution Summary

The expert explains operating segments of an enterprise. The threshold must be met for an operating segment to be a reportable segment is determined.

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