Deck 20: Operating Segments

Question 1

Which of the following statements is correct about the controversial issues surrounding AASB 8/IFRS 8?

A) The management approach adopted in AASB 8/IFRS 8 was argued to put preparers' needs ahead of users' needs.
B) The European Parliament was not able to endorse AASB 8/IFRS 8 due to strong oppositions from European countries.
C) Despite the objections from different parties, all IASB board members at the time unanimously agreed that AASB 8/IFRS 8 should replace AASB 114.
D) The proponents of AASB 114 argued that AASB 8/IFRS 8 contains too many mandatory disclosure requirements compared to AASB 114.

Answer 1

A

Question 2

For financial reporting periods commencing prior to 1 January 2009, the accounting standard relating to segment reporting was:

A) AASB 8 Operating Segments.
B) AASB 114 Segment Reporting.
C) AASB 114 Operating Segments.
D) AASB 8 Segment Reporting.

Answer 2

B

Question 3

If an entity presents both consolidated financial statements and parent entity financial statements in the same financial report, it must present:

A) condensed segment data that includes revenue information only.
B) segment data only on the basis of the parent entity financial statements.
C) segment data only on the basis of the consolidated financial statements.
D) segment information on the basis of both the consolidated and the parent financial information.

Answer 3

C

Question 4

Compared to AASB 114 Segment Reporting, AASB 8/IFRS 8 Operating Segments can be described as:

A) less prescriptive.
B) less onerous in terms of disclosure.
C) more closely aligned to other accounting standards.
D) preferred in the European Union to its predecessor.

Question 5

AASB 8/IFRS 8 requires disclosure in relation to which of the following?

A) The nature of any difference between the measurement of the reportable segments' revenue and the entity's revenue.
B) The nature of any difference between the measurement of the reportable segments' assets and liabilities and the entity's assets and liabilities.
C) The basis of accounting for all segments.
D) The nature and effect of all symmetrical allocations to reportable segments.

Question 6

Complete the following sentence: AASB 8/IFRS 8 Operating Segments came into effect for financial reporting periods _ _ on or after 1 January 2009. Early adoption was _______ .

A) ending, permitted
B) beginning, permitted
C) beginning, not permitted
D) ending, not permitted

Question 7

Liza, Kelsey and Josh are the three operating segments of Young Company. Which of the following statements is correct based on the information provided below? $\begin{array}{|l|r|r|r|r|r|r|}\hline \text { In } \$ 000 &{\text { Liza }} & \text { Kelsey } &{\text { Josh }} & \begin{array}{r}\text { Total } \\\text { operating } \\\text { segments }\end{array} & \begin{array}{c}\text { Other } \\\text { business } \\\text { units }\end{array} &{\begin{array}{c}\text { Total } \\\text { Young } \\\text { Company }\end{array}} \\\hline \text { Revenue } & 375 & 230 & 510 & 1115 & 395 & 1510 \\\hline \text { Profit/loss } & 200 & 130 & 285 & 615 & 160 & 775 \\\hline \text { Assets } & 455 & 315 & 850 & 1620 & 410 & 2030 \\\hline\end{array}$

A) Liza, Kelsey and Josh are reportable segments of Young Company.
B) Only Kelsey and Josh should be disclosed as reportable segments.
C) Kelsey is not a reportable segment as it does not satisfy the profit/loss quantitative threshold.
D) Young Company needs to identify another reportable segment from 'other business units' component.

Question 8

Under AASB 8/IFRS 8, entities are required to provide reconciliations on the following, except for:

A) the total of the reportable segment's revenue to the entity's revenue.
B) the total of the reportable segment's equity to the entity's equity.
C) the total of the reportable segment's liabilities to the entity's liabilities.
D) the total of the reportable segment's measures of profit and loss to the entity's profit or loss.

Question 9

AASB 8/IFRS 8 Operating Segments applies to:
I. listed entities.
II. public companies.
III. entities in the process of listing.
IV. any entity who voluntarily chooses to apply it.

A) I, II and III only.
B) II, III and IV only.
C) I, II and IV only.
D) I, III and IV only.

Question 10

Which of the following information is not required to be disclosed by entities complying with AASB 8/IFRS 8?

A) Revenues from external customers located in foreign countries.
B) The nature and effect of the changes in measurement of segment profit or loss.
C) A reconciliation of the total of the reportable segments' liabilities to the entity's liabilities.

Question 11

A key objective of providing financial reporting information by segment is:

A) to allow detailed analysis to be undertaken by users such as segment profit margin analysis.
B) to allow the user to better understand the entity's future performance.
C) to highlight poorly performing areas of an entity's business to users.
D) to allow users to better assess the entity's risks and returns.

Question 12

Under AASB 8/IFRS 8 all entities to which the standard applies are required to disclose:

A) a measure of segment liabilities.
B) factors used to identify all segments.
C) the basis of accounting for any transactions between reportable segments.
D) a reconciliation of total segment expenses to total consolidated expenses.

Question 13

Assuming the three business units below are operating segments and all revenue earned are from external customers, in which of the following scenarios does Bromwell Ltd need to identify another reportable segment to be disclosed? $\begin{array}{|l|r|r|r|r|r|r|}\hline \begin{array}{l}\text { Revenue } \\\text { in } \$ 000\end{array} & \text { Toby } & \text { Bailey } & \text { Ron } & \text { Total operating segments } & \begin{array}{c}\text { Other business } \\\text { units }\end{array} &{\begin{array}{c}\text { Total } \\\text { Bromwell } \\\text { Ltd }\end{array}} \\\hline \text { I. } & 150 & 320 & 640 & 1110 & 500 & 1610 \\\hline \text { II. } & 220 & 280 & 550 & 1050 & 350 & 1400 \\\hline \text { III. } & 460 & 500 & 750 & 1710 & 630 & 2340 \\\hline\end{array}$

A) I only.
B) I and II.
C) I and III.
D) II and III.

Question 14

Which of the following statements is incorrect? AASB 8/IFRS 8 requires external revenue by product to be disclosed on an entity wide basis by all entities to which AASB 8/IFRS 8 applies:

A) unless the information is not available and the cost to develop it would be excessive.
B) unless the information has already been provided as part of the reportable segment information.
C) and must be calculated based on the financial information used to produce the entity's financial statements.
D) unless providing such information would be considered to damage the entity's competitive advantage.

Question 15

The key decision points in identifying an entity's component as an operating segment include all the following criteria, except for:

A) the component's manager is part of the CODM.
B) discrete financial information are available for the component.
C) the component's operating results are regularly reviewed by the CODM.
D) the component is able to generate revenue and incur expenses from its business activities.

Question 16

AASB 8/IFRS 8 Operating Segments is primarily a:

A) measurement standard.
B) definition standard.
C) disclosure standard
D) conceptual standard.

Question 17

Based on the information provided below, which business unit(s) should be identified as Viewing Ltd's operating segment(s)? $\begin{array}{|l|c|c|c|}\hline & \text { Chidi } & \text { Eleanor } & \text { Jason } \\\hline \begin{array}{l}\text { Can the component generate revenue } \\\text { and incur expenses from its business } \\\text { activities? }\end{array} & \text { Yes } & \text { Yes } & \text { Yes } \\\hline \begin{array}{l}\text { Are the component's operating results } \\\text { regularly reviewed by the CODM? }\end{array} & \text { Yes } & \text { Yes } & \text { No } \\\hline \begin{array}{l}\text { Is discrete financial information } \\\text { available for the component? }\end{array} & \text { No } & \text { Yes } & \text { Yes } \\\hline\end{array}$

A) Chidi only.
B) Jason only.
C) Eleanor only.
D) Chidi and Jason.

Question 18

Katoomba Ltd has a board of directors that consist of a Managing Director (MD. and non-executive directors. The MD has a regular monthly meeting with the Chief Operating Officer (COO) and the managers of Katoomba's three business units. During the meeting, each manager would present an update of their unit's financial performance. The financial information is then reviewed by the MD and the COO to assess the performance of each business unit and to make decisions related to resource allocation. In this case, who is the CODM of Katoomba?

A) The MD only.
B) The board of directors.
C) The MD and the COO.
D) The MD, the COO, and the three managers.

Question 19

Segment disclosures are designed to:

A) disaggregate selected consolidated financial data.
B) condense particular items of consolidated financial data into one financial statement.
C) combine components of consolidated financial data to provide a higher level of summarisation.
D) aggregate revenues and expenses so that only net profit is shown for each important segment.

Question 20

Segments that do not satisfy the requirements of a reportable segment must:

A) be combined and disclosed as 'all other segments'.
B) not be disclosed at all in the financial report.
C) be reported in the notes to the financial statements.
D) be combined with the smallest reportable segment.