
a
Reportable segments: It is the process of deciding which operating segment is separately reportable and separate supplemental disclosures must be made. It is based on management’s classifications of each operating segment for internal evaluation of the financial position and operating performance of the enterprise.
The FASB specified three 10 percent significance rules to determine which of the operating segments shall have separately reported information. The separate disclosures are required for segments meeting at least one of the following tests:
- The segment revenue, including both external sales and intersegment sales, is 10 percent or more.
- The absolute value of segment’s profit or loss is 10 percent or more
- The segment’s assets are 10 percent or more of the total assets of all operating segments.
The profit or loss for each given geographical segments
a

Answer to Problem 13.17P
Operating profit:
- U.S $680.
- New Zealand $17.2
- Australia $85.2
Operating loss:
- Singapore $(2.4)
Explanation of Solution
Determination of reportable segment using 10 percent revenue test:
U.S. | New Zealand | Singapore | Australia | |
Sales to unaffiliated | $2,500 | $320 | $60 | $120 |
Inter area sales | 100 | 10 | ||
Total revenue | $2,600 | $320 | $70 | $120 |
Less: Operating expenses | 1,820 | 290 | 70 | 30 |
Allocated costs | 100 | 12.8 | 2.4 | 4.8 |
Operating profit (loss) | $680 | 17.2 | (2.4) | 85.2 |
Determination of allocated costs
b
Reportable segments: It is the process of deciding which operating segment is separately reportable and separate supplemental disclosures must be made. It is based on management’s classifications of each operating segment for internal evaluation of the financial position and operating performance of the enterprise.
The FASB specified three 10 percent significance rules to determine which of the operating segments shall have separately reported information. The separate disclosures are required for segments meeting at least one of the following tests:
- The segment revenue, including both external sales and intersegment sales, is 10 percent or more.
- The absolute value of segment’s profit or loss is 10 percent or more.
- The segment’s assets are 10 percent or more of the total assets of all operating segments.
The general reporting requirements related to the company’s geographical areas
b

Answer to Problem 13.17P
Revenue from external customers from Home County or Foreign Country shall be reported and long-lived assets in the home country and all the assets held in foreign countries must be reported.
Explanation of Solution
Revenue from external customers from the home country and from all customers of foreign countries is to be reported. If revenue from an external customer is material then it must be shown with separate disclosure.
Long-lived assets located in the home country and the total assets located in all foreign countries is to be reported. If the assets in any location are more than or equal to 10 percent of total assets then the amounts of assets held in that country shall be disclosed separately.
c
Reportable segments: It is the process of deciding which operating segment is separately reportable and separate supplemental disclosures must be made. It is based on management’s classifications of each operating segment for internal evaluation of the financial position and operating performance of the enterprise.
The FASB specified three 10 percent significance rules to determine which of the operating segments shall have separately reported information. The separate disclosures are required for segments meeting at least one of the following tests:
- The segment revenue, including both external sales and intersegment sales, is 10 percent or more.
- The absolute value of segment’s profit or loss is 10 percent or more.
- The segment’s assets are 10 percent or more of the total assets of all operating segments.
The separate reportable segments of the given geographical segments
c

Answer to Problem 13.17P
Domestic segment and New Zealand is separately reportable
Explanation of Solution
Determination of reportable segment using 10 percent revenue test:
Geographical area | Sales to unaffiliated customers | Percentage of consolidated revenue | Separately reportable |
Domestic | $2,500 | 83,3% | Yes |
New Zealand | 320 | 10.7% | Yes |
Singapore | 60 | 2% | No |
Australia | 120 | 4% | No |
Total | 3,000 | 100% |
Determination of reportable segment using 10 percent long lived assets test:
Geographical area | Sales to unaffiliated customers | Percentage of consolidated revenue | Separately reportable |
Domestic | $2,200 | 81.4% | Yes |
New Zealand | 280 | 10.4% | Yes |
Singapore | 140 | 5.2% | No |
Australia | 80 | 3% | No |
Total | 2,700 | 100% |
For both revenue and long lived assets test New Zealand operations are separately reportable
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