Deck 11: Segment Reporting by Diversified Entities

Question 1

In the reporting of segment revenue data:

A) intra-segment revenue is eliminated as part of the consolidation process so that only sales revenue derived from sales to external customers is reported.
B) an entity must disclose the segment revenue for each reportable segment, although total intra-segment revenue may be disclosed as a lump sum for all segments.
C) an entity must disclose the segment revenue for each segment, with revenue from external customers and intra-segment revenue reported separately.
D) none of the above.

Answer 1

C

Question 2

The aim of segment reporting is to provide entity stakeholders with the information required to:

A) have a better understanding of the entity's past performance.
B) make a more informed assessment of the entity's risks and returns.
C) make more informed judgments about the performance and position of the entity as a whole.
D) all of the above.

Answer 2

D

Question 3

The definition of operating segments requires recognition of components of the entity that:

A) are cost centres.
B) are production units.
C) have similar gross margins.
D) none of the above.

Answer 3

D

Question 4

Based on the business segments determined to be reportable segments for reporting to the board of directors each month,the following data have been derived from the notes attached to the subsidiary financial statements (amounts in thousands): $\begin{array}{lrrrr}\text { segment }&\text { Other }&\text { Sales }&\text { Result }&\text { Assets }\\&\text { Revenue }&\text { Revenue }\\\text { Piebalds } & \$ 30000 & \$ 5000 & \$ 2000 & \$ 30000 \\\text { Skewbalds } & 10000 & 15000 & 4000 & 10000 \\\text { Pintos } & 20000 & 5000 & (500) & 15000\\\text { Crillos } & 15000 & 5000 & 3000 & 7000 \\\text { Other } & 5000 & - & 1000 & 10000\\\text { Total }&\$80,000&\$30,000&\$9,500&\$72,000\end{array}$

- On revenue and results only,the reportable business segments are:

A) Piebalds, Pintos and Crillos.
B) Piebalds, Skewbalds, Pintos and Crillos.
C) Piebalds, Skewbalds, Pintos, Crillos and Others.
D) none of the above.

Question 5

The management approach to identifying segments will result in consistency between internal and external reporting of segment information.

Question 6

A segment which does not reach any of the materiality thresholds can nevertheless be:

A) designated as a reportable segment.
B) combined with other segments.
C) not reported separately.
D) all of the above.

Question 7

How might management be able to conceal segment information under the 'management approach' to identifying reportable segments?

Question 8

The major argument against supplying segment information is that it provides users with potentially competitively damaging information.

Question 9

A segment that does not meet any of the materiality thresholds in the current period can never be disclosed as a reportable segment.

Question 10

Based on the business segments determined to be reportable segments for reporting to the board of directors each month,the following data have been derived from the notes attached to the subsidiary financial statements (amounts in thousands): $\begin{array}{lrrrr}\text { segment }&\text { Other }&\text { Sales }&\text { Result }&\text { Assets }\\&\text { Revenue }&\text { Revenue }\\\text { Piebalds } & \$ 30000 & \$ 5000 & \$ 2000 & \$ 30000 \\\text { Skewbalds } & 10000 & 15000 & 4000 & 10000 \\\text { Pintos } & 20000 & 5000 & (500) & 15000\\\text { Crillos } & 15000 & 5000 & 3000 & 7000 \\\text { Other } & 5000 & - & 1000 & 10000\\\text { Total }&\$80,000&\$30,000&\$9,500&\$72,000\end{array}$

-On the basis of revenue,asset and results,the reportable business segments are:

A) Piebalds, Pintos and Crillos.
B) Piebalds, Skewbalds, Pintos and Crillos.
C) Piebalds, Skewbalds, Pintos, Crillos and Others.
D) none of the above.

Question 11

Under Accounting Standard AASB 8 Operating Segments,segments are delineated on the basis of:

A) industries of operation.
B) differences in risk and return.
C) the internal management and reporting structure.
D) none of the above.

Question 12

What are the two characteristics of reliable information?

A) Representational faithfulness and verifiability
B) Timeliness and representational faithfulness
C) Verifiability and relevance
D) Representational faithfulness and relevance

Question 13

A diversified group is one that operates in markets that:

A) have different rates of profitability.
B) have different opportunities for growth.
C) have different degrees of risk.
D) all of the above.

Question 14

An immaterial segment is never disclosed despite the 75% rule.

Question 15

Operating segments may only be combined if they have similar economic characteristics.

Question 16

The major argument for the disclosure in segment information concerns financial
statement presentation.

Question 17

Under Accounting Standard AASB 1039 Concise Financial Reports,segment information is required to be presented:

A) in the financial statements.
B) in the notes to the financial statements.
C) is not required.
D) none of the above.

Question 18

Based on the business segments determined to be reportable segments for reporting to the board of directors each month,the following data have been derived from the notes attached to the subsidiary financial statements (amounts in thousands): $\begin{array}{lrrrr}\text { segment }&\text { Other }&\text { Sales }&\text { Result }&\text { Assets }\\&\text { Revenue }&\text { Revenue }\\\text { Piebalds } & \$ 30000 & \$ 5000 & \$ 2000 & \$ 30000 \\\text { Skewbalds } & 10000 & 15000 & 4000 & 10000 \\\text { Pintos } & 20000 & 5000 & (500) & 15000\\\text { Crillos } & 15000 & 5000 & 3000 & 7000 \\\text { Other } & 5000 & - & 1000 & 10000\\\text { Total }&\$80,000&\$30,000&\$9,500&\$72,000\end{array}$

- On revenue and asset criteria only,the reportable business segments are:

A) Piebalds, Pintos and Crillos.
B) Piebalds, Skewbalds, Pintos and Crillos.
C) Piebalds, Skewbalds, Pintos, Crillos and Others.
D) none of the above.

Question 19

Which of the following is NOT considered a basis for allocating joint selling and marketing expenses?

A) Number of products
B) Sales revenue of services
C) Air time for each product
D) Square footage of manufacturing space for each product

Question 20

Where the total revenue derived by the reportable segments of a group from the provision of goods or services to external customers is less than 75% of the total group sales revenue:

A) other components of the business are identified as reportable segments until the 75% threshold is reached.
B) other components are combined as a reportable segment until the 75% threshold is reached.
C) other components are combined in segments in which the combined segment revenue derived from external sales is 10% or more of the total external sales until the 75% threshold is reached.
D) none of the above.

Question 21

Outline the requirements to report information on geographical segments under current accounting standards.

Question 22

Segment information must be disclosed:

A) on the face of the financial statements.
B) in a note to the financial statements.
C) either A or B.
D) none of the above.

Question 23

In reporting segment information,an entity must provide a reconciliation of:

A) reportable segment sales revenue to total revenue.
B) reportable segment profit or loss before tax to total profit or loss before tax.
C) reportable segment assets and liabilities to total assets and liabilities.
D) all of the above.

Question 24

Disclosure of segment information includes which of the following categories?

A) General information
B) Information about profit or loss
C) Information about assets and liabilities
D) All of the above

Question 25

As part of the consolidation process,any unrealised profits arising from intragroup merchandising transactions are eliminated.If the intragroup transactions are inter-segment transactions,the effect of this elimination on the segment data reported by subsidiaries will be to:

A) reduce the relevant segment result reported by the subsidiary.
B) have no effect on the segment result reported by the subsidiary.
C) reduce both the segment result reported by the subsidiary and reduce the consolidated profit of the group.
D) none of the above.

Question 26

For purposes of the reliance on a major customer,entities under common control are
considered as a single customer,

Question 27

As part of the consolidation process,any unrealised profits arising from intragroup merchandising transactions are eliminated.If the intragroup transactions are intra-segment transactions,the effect of this elimination on the segment data reported by subsidiaries will be to:

A) reduce the relevant segment result reported by the subsidiary.
B) have no effect on the segment result reported by the subsidiary.
C) reduce both the segment result reported by the subsidiary and reduce the consolidated profit of the group.
D) none of the above.

Question 28

Discuss the issues involved in allocating revenues,profits and assets to segments.

Question 29

Information in relation to the amount of impairment losses and reversal of impairment losses for operating segments is required under Accounting Standard AASB 136 Impairment of Assets.

Question 30

Under current accounting standards,companies are required to report information on geographical segments.