Answer
A segment becomes a reportable segment if it satisfies one or more of the tests given below;
1. Revenue is 10% or more of the total revenue of the combined segments. For this test, the revenue of individual segments and combined segments include intersegment sales/transfers as well as sales to unaffiliated customers.
2. The absolute amount of loss or profit is 10% or more of; the greater of;
(a)The combined operating profit of all the profitable segments.
(b)The combined operating loss of all the loss-making segments.
(c) The identifiable assets are equal to or greater than 10% of all the identifiable assets of the company.
Additionally, companies must not report too many segments to keep financial information simple and relevant. Usually, companies should report up to 10 segments, although the FASB has not specified a number.
Further, segment data must explain a significant portion of the company business for relevance purposes.
Work Step by Step
No further steps involved.
