Intermediate Accounting: Reporting Standards
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Questions and Answers

What must be reported regarding revenues from external customers?

  • Only revenues from the enterprise’s country of domicile
  • Total revenues without any geographical breakdown
  • Revenues for each product or service or each group of related products or services (correct)
  • Only revenues from foreign countries

Which scenario requires disclosure of major customers?

  • A single customer contributing 10% or more of enterprise revenues (correct)
  • A customer representing 5% or more of revenues
  • Only customers from foreign governments
  • Any customer regardless of revenue contribution

In the context of major customers, how should governments be treated?

  • Only local governments are counted as major customers
  • Federal, state, local, and foreign governments should be considered as a single customer (correct)
  • Each government should be treated separately
  • Governments are excluded from customer disclosures

What long-lived assets need to be reported?

<p>Long-lived assets located in both the enterprise’s country of domicile and foreign countries (B)</p> Signup and view all the answers

Which information is NOT required to be disclosed about major customers?

<p>Names of major customers (C)</p> Signup and view all the answers

What is the primary goal of interim reporting?

<p>To enhance the decision-making process of management (C)</p> Signup and view all the answers

How does an interim period relate to the annual period?

<p>Each interim period is viewed as an integral part of the annual period (A)</p> Signup and view all the answers

What defines an operating segment according to FASB Statement No. 131?

<p>Segments are defined by how management organizes information for decision-making (D)</p> Signup and view all the answers

What is typically included in segmental disclosures?

<p>Identification of both operating and reportable segments along with enterprise-wide disclosures (D)</p> Signup and view all the answers

Which of the following statements about summarized interim data is correct?

<p>It may present summarized data rather than complete financial statements (D)</p> Signup and view all the answers

Which of the following is NOT a characteristic of an operating segment?

<p>It operates independently of other segments (D)</p> Signup and view all the answers

What is a requirement for identifying reportable segments?

<p>Must have a reasonable number of segments without being excessive (B)</p> Signup and view all the answers

Which type of data is generally not included in interim reporting?

<p>Complete financial statements (D)</p> Signup and view all the answers

What is one criterion for an operating segment to be considered reportable?

<p>Its reported profit or loss is 10% or more of the combined profit of all operating segments. (A)</p> Signup and view all the answers

Which of the following is NOT a threshold for determining if a segment is reportable?

<p>A direct connection to external customers’ satisfaction. (D)</p> Signup and view all the answers

What aggregate revenue percentage must reportable segments achieve to be deemed reasonable?

<p>At least 75% of consolidated revenue. (C)</p> Signup and view all the answers

How should profit or loss measures for segments be treated?

<p>They should follow a management approach for internal decision making. (B)</p> Signup and view all the answers

What must be disclosed about segment assets?

<p>The segment assets evaluated by the Chief Operating Decision Maker (CODM). (A)</p> Signup and view all the answers

When should aggregation of segments be considered?

<p>If the number of reportable segments exceeds 10. (B)</p> Signup and view all the answers

Which of the following must be reconciled to consolidated amounts?

<p>The information presented for reportable segments. (C)</p> Signup and view all the answers

Which of the following statements is true regarding reportable segments?

<p>Each reportable segment must encompass profitability data. (A)</p> Signup and view all the answers

Flashcards

Interim Reporting Goal

Provides timely financial information to aid decision-making, viewing each interim period as part of the annual period.

Interim Reporting Accounting

Applies the same annual accounting principles, with some modifications, for interim reporting.

Segmental Reporting Importance

Enhances understanding of an enterprise's different operating parts, performance and risk.

Operating Segment (Management Approach)

A part of an enterprise identified by management as necessary for decision-making and performance assessment.

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Reportable Segments

Segments identified based on certain criteria, typically by revenue size or profitability, for financial reporting.

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Segmental Disclosures Content

Includes key information about each operating segment, like revenues, expenses, and assets.

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Operating Segment Traits

A component within a company generating revenue and incurring expenses, considered by management for decision-making.

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Interim Reporting Summary

Shortened or condensed presentation of financial data/statements, rather than complete statements, for interim periods.

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Enterprise-Wide Disclosures

Financial information required to be reported for the entire company, including revenues from external customers and location of key assets.

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Major Customer Threshold

A single customer representing 10% or more of a company's revenue requires specific disclosure, including revenue amounts and segment traceability.

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Government as Customer

When disclosing major customers, federal, state, local and foreign governments are considered individually.

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Major Customer Disclosure

For each major customer, a company must disclose total revenue and the specific operating segments that generate that revenue.

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Major Customer Anonymity

While disclosing revenue and operating segments, companies are not obligated to disclose the names of their major customers.

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Revenue Threshold

A segment's revenue must be at least 10% of the total revenue of all operating segments to be considered reportable.

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Profit/Loss Threshold

A segment's profit or loss must meet a 10% threshold of the total segments' profit or loss for reporting consideration.

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Asset Threshold

A segment's assets must be at least 10% of the total assets of all operating segments to be reportable.

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Segment Reporting

A reporting requirement that aims to present an aggregate revenue of reportable segments that must be equal to or exceed 75% of the consolidated revenue and that the number of reportable segments must be a reasonable number.

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Segment Profit/Loss

A measure of profit or loss that aligns with how management analyzes the segment, not a standard external profit definition.

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Segment Assets

Assets of a specific segment that needs to be evaluated by chief operating decision makers (CODM).

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Consolidated Reconciliation

The segmental information reported has to be compared and reconciled to the total or consolidated amounts for the overall company to ensure all accounting data matches.

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Study Notes

Interim Reporting

  • Interim reporting provides timely information, impacting decision-making.
  • Interim periods are integral parts of the annual period.
  • Accounting principles for interim reporting are similar to annual reporting, with some modifications.
  • Interim reports may present summarized data instead of complete financial statements.

Segmental Reporting

  • Segmental reporting is crucial for evaluating performance and making operating decisions.
  • FASB Statement No. 131 defines operating segments based on management approach.
  • Operating segments arise from how management organizes information for decision-making.
  • Identifying operating and reportable segments is essential.
  • A reasonable number of segments are reported, with aggregate revenue of reportable segments ≥75% consolidated revenue.
  • If the number of reportable segments exceeds 10, consider aggregating certain reportable segments.

Reportable Segments

  • Reportable segments are those satisfying one of the following criteria:
    • Reported revenue (including intersegment sales or transfers) is 10% or more of the combined revenue of all reported operating segments.
    • Absolute amount of reported profit or loss is 10% or more of the greater of the combined profit (of segments not reporting a loss) or the combined loss (of segments reporting a loss).
    • Assets are 10% or more of combined assets of all operating segments.

Content of Segmental Disclosure

  • Segment information focuses on internal decision-making, rather than strict profit definitions.
  • Segment assets are evaluated by the Chief Operating Decision Maker (CODM).
  • Information for reportable segments must reconcile with consolidated enterprise amounts.
  • Specified interim period disclosures are necessary.

Enterprise-Wide Disclosures

  • Report revenues from external customers for each product or service group.
  • Report revenues from external customers for the company's domestic and all foreign countries.
  • Report long-lived assets located in the company's domestic and all foreign countries.

Disclosures Regarding Major Customers

  • Disclose if a single customer accounts for 10% or more of enterprise revenues.
  • Federal, state, local, and foreign governments are considered single customers.
  • Disclose the total revenues traceable to each major customer and the segment(s) involved.
  • Names of major customers do not need to be disclosed.

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Related Documents

Interim Reporting and Disclosures about Segments of an Enterprise - Fischer/Taylor/Cheng 10th Edition PDF

Description

This quiz covers key concepts of interim and segmental reporting in intermediate accounting. Understand how these reporting standards affect decision-making and performance evaluation within organizations. Focus on the nuances between interim reports and the criteria for identifying reportable segments.

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