Segment reporting
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A central issue in reporting on operating segments of a business enterprise is the determination of which segments are reportable.
Instructions:
1. What are the tests to determine whether or not an operating segment is reportable?
2. What is the test to determine if enough operating segments have been separately reported upon, and what is the guideline on the maximum number of operating segments to be shown?
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This posting answers in detail the student's questions on issues in reporting on operating segments of a business enterprise.
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1. There are three basic tests to be applied to segments of a company to see if they are significant enough to be separately reportable. If a segment meets any one of the tests, it is deemed significant and reportable.
The first test is based upon revenue. If a segment's revenue from sales to unaffiliated customers and intersegment sales and transfers is equal to 10 percent or more of the enterprise's combined revenues, the segment is reportable.
The second test is based upon profits ...
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