Segment Reporting

Objective to provide information on business activities and economic environment of a

company to help users of F/S to
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Better understand entitys performance

Better assess future net cash flows
Make informed judgment about entity as a whole

GR: an entity is required to disclose:

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Segment profit or loss

Segment assets
Certain related items

GR: entity is NOT required to report:

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Segment cash flow

IFRS: requires disclosure of segment liabilities if such a measure is provided to chief

operating decision maker.
Required disclosures ALL PUBLIC ENTITIES to conform with IFRS and GAAP
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Operating segments
o Annual
o Interim
Products and services
Geographic areas
Major customers

Use SAME accounting principles as MAIN F/S or reconciled to related aggregate

amounts in the F/S
Intercompany transactions NOT eliminated for Reporting
Segment reporting applies to PUBLIC COMPANIES ONLY.

OPERATING SEGMENTS
Definitioncomponent of an enterprise:
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Engages in business activities that earns revenues and incurs expenses

Operating results are regularly reviewed by chief operating decision maker
Discrete financial information is available Traceable cash flow

NOT an operating segment

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Corporate headquarters
Pension plan

Reportable segment operating segments of an enterprise that meets the criteria for separate
reporting

MATERIALITY TESTS
1. 10% Size Test - must meet only one
a. Revenue
b. Reported profit or loss
c. Assets
2. 75% Reporting sufficiency test external revenue
a. Consolidated keep adding up until reach 75%
All other segments category: other business activities and operating segments that are not
reportable s/b combined and disclosed in this category.
Comparative reporting:
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Reportable in preceding period, not reportable in current period:

o Can continue to be reported separately if management decides it has
continuing significance
Not reportable in prior period, reportable in current period
o Segment data for prior periods restated to reflect newly reportable segment
as a separate segment

Segment Profit or loss:

Formula:
Revenues for that segment internal and external
<directly traceable costs>
<reasonably allocated costs> -- By CFO
= Operating profit (or loss) EBIT

Items EXCLUDED from segment profit (or loss)

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General corporate revenues, expenses

Interest expense (except for financial institutions)
Income taxes

Equity in earnings and losses of unconsolidated subsidiary (i.e. under the equity
method)
Gains or losses from discontinued operations
Minority interest

Income and expenses are NOT allocated to a segment unless they are included in the
determination of segment profit or loss reported to chief operating decision maker

Reportable segment disclosures

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Identifying factors
o Basis of organization
Products and services
Profit or loss
o Revenue from external customers
o Revenue from intersegment transaction
o Interest revenue/Interest expense
o Depreciation, depletion, amortization (DDA)
o Unusual items
o Equity in net income accounted for by equity method
o Income tax expense or benefit
o Significant noncash items other than DDA
Assets
o Amount of investment in equity method investees
o Total expenditures for
Additions to long lived asset other than financial instruments
Long term customer relationships of a financial institution
Mortgage and other servicing rights
Deferred policy acquisition costs
Deferred tax assets
Liabilities (IFRS only)
Measurement Criteria
o Basis of accounting
o Nature of any differences
o Nature of any changes
o Nature and effect of allocations to segments
Reconciliations
o Total of reportable segments to consolidated
Revenues
Measure of profit or loss
Assets
Liabilities

Other significant items of information

Enterprise-wide disclosures
1. Products and services
a. Revenues from external customers from each product or services
b. If impractical to do so, that must be disclosed
2. Geographic areas
a. Revenues disclose revenues from external customers that are
i. Attributable to domicile country
ii. Attributed to all foreign countries if material amount
iii. Attributed to individual foreign countries if material
iv. Basis for attributing revenues from external countries to individual
countries
3. Major Customers
a. 10% or more of its revenue from one customer must disclose
i. That fact
ii. Total amount of revenues from each customer
iii. Identify of segment(s) reporting the revenues
b. Identify of customer need not be reported.