Exam 10: Operating Segments

Which of the following is not a key step in applying IFRS 8?

Which of the following would identified as an operating segment?

Comparability of segments among entities in an industry may be reduced as a result of the management approach outlined in IFRS 8.

Reportable segments are determined based on qualitative thresholds of revenue, profit or loss, and assets.

Any changes in the composition of an entity's reportable segments result in the restatement of comparative information for earlier periods.

Refer to question 1. Assume that presenting updated comparative information for earlier periods is infeasible due to the cost and the unavailability of information. How will the new segments be presented in this year's financial statements?

The chief operating decision maker (CODM) regularly reviews non-IFRS information that is subsequently used in allocating resources to reportable segments and assessing performance. Consequently, the information is not permitted in the financial statements under IFRS.

The amounts disclosed for each reportable segment is the measure reported to the CODM which can be different from the measures used in the primary financial statements.

Refer to question 4. Assuming the same facts, management decides that reporting SKS separately would be useful to financial statement users. In addition to OOS and CCC, What operating segments are separately reportable?

Conglomerate Entity (CE) has identified three segments on December 31, 20X7. In 20X7, CE had total revenue of $60.4 million, total profit of $10.5 million and total assets of $12 million. Which of CE's segments are reportable? Segment Revenues Segment P \&L in millions Segment Assets Segment A 42.0 6.3 12.8 Segment B 10.4 4.5 1.2 Segment C Total

What are some ways operating segments are identified?

Orange Entity designs and manufactures high-tech consumer goods. They have determined that two subsidiaries - the Orange Operating Systems (OOS) segment and the Clandestine Clementine Computers (CCC) segment both meet the criteria in IFRS 8 for being separately reportable. An additional two segments - Marmalade Mice Manufacturing (MMM) and Sun Kissed Solar Energy (SKS) did not meet the criteria for being separately reportable. Total external revenue for Orange Entity for the year was €100 million. Of that amount, OOS generated €30 million , CCC generated €40 million, MMM generated €26 million, and SKS generated €4 million. In addition to OOS and CCC, What operating segments are separately reportable?

Identifying the entity's CODM is a critical step in meeting the requirements for segment disclosures.

The CODM regularly reviews measures of segment profit or loss. However, the measures do not correspond consistently with allocation of assets to reportable segments. Consequently, the information is not permitted in financial statements under IFRS.

Define operating segment.

You are the CODM of Sgt. Pepper's Pizzeria, a publicly traded pizza entity in Liverpool, England. You currently have two subsidiaries that qualify as separate segments - Penny Lane Pizzas (A) and Lovely Rita's Pizzas (B). Due to inefficient distribution of assets, you determine that an organizational overhaul is needed. You decide to add another separate segment - Paul's Famous Pizza Pies (C), and combine A and B into a single reportable segment - Dear Prudence Pizzas (D). The changes take effect this year. How will these new segments be presented in this year's financial statements?

Giant Entity (GE) has four business components A, B, C and D. Two of these business components A and B are manufacturing plants located in the Netherlands. Each plant manufactures and sells a different product to customers located in the Netherlands. The CEO of each plant (the CODM) makes decisions about allocating resources and assessing performance. Two other components, C and D are manufacturing plants located in Zimbabwe, that are organized to mirror the Netherlands operations but each manufactures and sells products to customers in Zimbabwe. GE's vice-president for foreign operations in Zimbabwe is responsible for assessing performance and making resource allocation decisions for the Zimbabwe operation as a whole. How many operating segments does GE have?

Refer to questions 5 and 6. Which enhancing qualitative characteristic from the conceptual framework (chapter 2) are you trying to preserve in this situation?

You are the CODM of Yellow Submarine Marine Manufacturing, a publicly traded entity in Southampton, England. Your entity has 2 segments - the submarine segment and the yacht segment. You don't have to reconcile these reportable segments' revenues to Yellow Submarine's total revenue on your financial statements.

An entity may aggregate certain operating segments that have similar economic characteristics and comply with specific aggregation criteria.