Deck 25: Segment Reporting

Question 1

Segment information may be useful to investors who wish to use ethical guidelines about which industries or countries they invest in:

Answer 1

True

Question 2

AASB 8 allows reportable segments to be combined as a single reportable business or geographical segment if: (a) they exhibit similar long-term financial performance; and (b) they are similar in all of the appropriate factors identified in the Standard in relation to segment revenues, expenses, assets and liabilities:

Answer 2

True

Question 3

AASB 8 identifies five factors that are to be considered in determining whether or not products and services are related for the purposes of defining a business segment. It further specifies that the products and services included in a business segment must be similar with respect to all these factors:

Answer 3

False

Question 4

AASB 8 does not require disclosure of a reportable segment if a segment is mainly transacting with related parties.

Question 5

AASB 8 specifies guidelines regarding whether or not a segment is reportable. These guidelines are known as the 10 per cent rules. All three rules are required to be met in order to establish a reportable segment:

Question 6

An important argument for providing segmental information in the financial reports is:

A) It is simpler and easier for users to follow.
B) Consolidated information is so aggregated that it may disguise poor performance and very good performance among segments of the entity.
C) The shareholders of the individual companies in the group can use the segment information to assess the performance of their company.
D) The segments of the entity will be taxed separately on their earnings.
E) None of the given answers.

Question 7

If a financial report contains both the consolidated financial statements of a parent and the parent's separate financial statements, segment information is required for both statements.

Question 8

AASB 8 specifies that a geographical segment cannot include more than two countries:

Question 9

A geographical segment is defined in part by AASB 8 as being a distinguishable component of an entity engaged in providing products and services within a particular social and cultural environment:

Question 10

AASB 8 "Operating Segments" requires an entity to report a measure of segment liabilities and particular income and expense items, if such measures are regularly provided to the chief operating officer.

Question 11

The core principle of AASB 8 "Operating Segments" is for a reporting entity to disclose information to enable users of its financial statements to evaluate the nature and financial effects of the business activities in which it engages and the economic environments in which it operates.

Question 12

AASB 8 bans the disclosure of segments that do not pass the "10 per cent test".

Question 13

Research has shown that companies only provide segment information when it is required by accounting regulation:

Question 14

Management may be concerned that segment reporting will put the entity at competitive disadvantage, so it has been suggested that it can avoid providing accurate segment reports through opportunistic interpretation of the definition of a business segment:

Question 15

Two or more operating segments may be aggregated into a single operating segment if aggregation is consistent with the core principle of AASB 8, or the segments have similar economic characteristics, or the segments are similar in the nature of the products and services.

Question 16

Identification of operating segments in AASB 8 "Operating Segments" adopts a 'rules-based' approach, while its predecessor AASB 114 "Segment Reporting" adopts a 'principles-based' approach.

Question 17

Managers may choose to provide segment data voluntarily because:

A) They want to highlight the companies in the group that are doing well.
B) Managers generally do not believe that consolidated accounts are meaningful.
C) The segment information will demonstrate more accurately where they have done well and where they have done badly.
D) It demonstrates a greater level of accountability that may attract investment funds.
E) None of the given answers.

Question 18

AASB 8 "Operating Segments" requires reconciliation of total reportable segment revenues, total profit or loss, total assets, total liabilities and other amounts disclosed for reportable segments to the corresponding amounts shown in the parent entity's separate financial statements.

Question 19

For a segment to be reportable AASB 8 requires that majority of revenues be earned from external parties and the segment satisfies one of the three quantitative thresholds:

Question 20

IAS 8 was issued as part of the ongoing process to converge IAS standards with US Accounting Standards:

Question 21

Gandulf Ltd provides the following segment information:

Which of the segments are reportable applying only the segment asset test?

A) Business segments: Industrial manufacturing, project consulting, mechanical engineering; Geographical segments: Australia, US.
B) Business segments: Industrial manufacturing, mechanical engineering; Geographical segments: Australia.
C) Business segments: Mechanical engineering; Geographical segments: Australia.
D) Business segments: Industrial manufacturing, project consulting, mechanical engineering, retailing, agriculture; Geographical segments: Australia, US.
E) None of the given answers.

Question 22

Potential costs of providing segment information include:

A) Management taking extra risks in order to attempt to generate increased returns in its segment.
B) Allowing current or potential investors to identify that the entity is earning high profits in a segment.
C) Disclosing that a segment is making a loss. This may lead to take-over bids by other organisations.
D) Allowing current or potential competitors to identify that the entity is earning high profits in a segment. This may increase competition through new entrants or an attempt to replicate the factors leading to the entity's success.
E) All of the given answers.

Question 23

Situations in which aggregated data may be sufficient to evaluate the performance of an entity include:

A) Where the entity has not existed for a long period of time.
B) Where the segments of the entity have highly correlated profit prospects.
C) Where the entity has a large consolidated asset base.
D) Where the entity operates in different geographic areas with different risks.
E) None of the given answers.

Question 24

Examples of segment assets may include:

A) Intangible assets.
B) Assets that are the subject of finance leases.
C) Deferred income tax assets.
D) Intangible assets and assets that are the subject of finance lease.
E) All of the given answers.

Question 25

Segment revenues as not including:

A) Interest earned on loans to other segments.
B) Interest or dividend income, unless the segment's operations are primarily of a financial nature.
C) Joint venturer's revenues from its share of joint venture operations.
D) Interest earned on loans to other segments and interest or dividend income, unless the segment's operations are primarily of a financial nature.
E) All of the given answers.

Question 26

Segment expenses as not including:

A) Joint venturer's expenses relating to the operation of joint venture operations.
B) Losses on sales of investments or extinguishment of debt unless the segment's operations are primarily financial in nature.
C) Income tax expense.
D) Losses on sales of investments or extinguishment of debt unless the segment's operations are primarily financial in nature and income tax expense.
E) All of the given answers.

Question 27

In AASB 8 "Operating Segments", which of the following is not a consideration in determining the operating segments of an entity?

A) Business activities from which an entity may earn revenues and incur expenses;
B) Component of an entity whose operating results are regularly reviewed by the entity's chief operating decision maker;
C) The entity's distribution and supply chain management system;
D) Component of an entity where discrete financial information is available;
E) None of the given answers.

Question 28

The guidelines to determine that a segment is reportable in accordance with AASB 8 "Operating Segments" includes:

A) The segment's assets are equal to or greater than 10 per cent of the entity's total assets.
B) The expenses of the segment that relate to external sales are equal to or greater than 10 per cent of total segment expenses.
C) The segment's assets are 10 per cent or more of the combined assets of all operating segments.
D) The expenses of the segment that relate to external and internal sales are equal to or greater than 10 per cent of total segment expenses.
E) None of the given answers.

Question 29

Segment assets are:

A) The net value of assets that are directly employed by a segment in its activities.
B) The gross value of assets attributable to the segment plus any share of centrally held assets that contribute to segment activities indirectly.
C) The current assets that constitute the working capital of the segment and are used directly in its activities plus any non-current assets specifically held for the purpose identified as the segment's business or geographical activity.
D) Those assets that are employed by a segment in its operating activities and that either are directly attributable to the segment or can be allocated to that segment on a reasonable basis.
E) None of the given answers.

Question 30

AASB 8 identifies a number of purposes for segment data. These include:

A) Enhance understandability of the information.
B) Achieve comparability with other entities.
C) Provide relevant and reliable information to users about product/service-related risks and returns.
D) Provide relevant and reliable information to users about geographically related risks and returns.
E) All of the given answers.

Question 31

The guidelines to determine that a segment is reportable in accordance with AASB 8 "Operating Segments" includes:

A) Segment's reported revenue, including external customers and intersegment sales or transfers, is 10 per cent or more of the combined revenue, internal and external, of all operating segments;
B) Segment's reported profit or loss is 10 per cent or more of the greater, in absolute amount, of (i) the combined reported profit of all operating segments that did not report a loss and (ii) the combined reported loss of all operating segments that reported a loss;
C) Segment's assets are 10 per cent or more of the combined assets of all operating segments.
D) Operating segments that do not meet any of the quantitative thresholds may be considered reportable, and separately disclosed, if management believes that information about the segment would be useful to users of the financial statements.
E) All of the given answers.

Question 32

The guidelines to determine that a segment is reportable in accordance with AASB 8 "Operating Segments" includes:

A) The segment's external revenue is equal to or greater than 10 per cent of the external sales of all operating segments.
B) The expenses of the segment that relate to external sales are equal to or greater than 10 per cent of total segment expenses.
C) The segment's reported revenue, including both sales to external customers and intersegment sales or transfers, is 10 per cent or more of the combined revenue, internal and external, of all operating segments.
D) The expenses of the segment that relate to external sales are equal to or greater than 10 per cent of total segment expenses, and the segment's revenues are 10 per cent or more of the total segment revenues.
E) None of the given answers.

Question 33

Gollum Ltd provides the following segment information:

There are no inter-segment sales. Which of the segments are reportable applying only the segment result test?

A) Business segments: Industrial manufacturing, project consulting, retailing, agriculture; Geographical segments: Australia, Pacific Islands, US.
B) Business segments: Industrial manufacturing, project consulting; Geographical segments: Australia.
C) Business segments: Industrial manufacturing, project consulting, mechanical engineering, retailing, agriculture; Geographical segments: Australia, Pacific Islands, US.
D) Business segments: Industrial manufacturing, project consulting, agriculture; Geographical segments: Australia, Pacific Islands.
E) None of the given answers.

Question 34

The guidelines for determining that a segment is reportable in accordance with AASB 8 includes:

A) The segment's equity is equal to or greater than 10 per cent of the total segment equity.
B) The expenses of the segment that relate to external sales are equal to or greater than 10 per cent of total segment expenses.
C) The segment's revenues are 10 per cent or more of the total segment revenues.
D) The expenses of the segment that relate to external sales are equal to or greater than 10 per cent of total segment expenses and the segment's revenues are 10 per cent or more of the total segment revenues.
E) None of the given answers.

Question 35

A business segment is defined by AASB 8 as:

A) A component of an entity that is of separable and identifiable interest to a section of stakeholders of the entity.
B) A distinguishable component of an entity and that component is engaged in providing an individual product or service or group of related products or services and is subject to risks and returns that are different from those of other distinguishable components of the entity.
C) An identifiable component of an entity that is engaged in providing an individual product or service to other entities within the group and is subject to special risks and returns as a result of relying on other components of the entity.
D) An identifiable component of an entity based on functional relationships with suppliers or customers or financiers established over a period of time.
E) None of the given answers.

Question 36

The guidelines for determining that a segment is reportable in accordance with AASB 8 include:

A) Its segment result, whether a profit or loss result, is 10 per cent or more of the combined result of all segments that earned a profit or the combined result of all segments that incurred a loss, whichever is the greater absolute amount.
B) Its segment result, if a profit, is 10 per cent or more of the combined result of all segments that made a profit, or if the segment made a loss, its loss is 10 per cent or more of the absolute amount of the total segment losses.
C) Its segment result, whether a profit or loss result, is 10 per cent or more of the absolute value of the combined results of all segments.
D) Its segment result, whether a profit or loss result, is 10 per cent or more of the combined result of all segments that earned a profit or the combined result of all segments that incurred a loss, whichever is the lesser absolute amount.
E) None of the given answers.

Question 37

AASB 8 requires that:

A) Reportable segments must individually constitute less than 75 per cent of the entity's total revenues.
B) The total revenues attributable to the reportable segments must be equal to or greater than 75 per cent of the entity's total revenues.
C) The total external revenues attributable to reportable segments must equal at least 75 per cent of the entity's total revenues.
D) The sum of the individual reportable segment's profits or losses must be equal to or greater than 75 per cent of the entity's absolute amount of profit or loss.
E) None of the given answers.

Question 38

According to AASB 114, factors to be considered in aggregating operating segments include:

A) A similar production process.
B) Exchange control regulations.
C) A common communications network.
D) A similar regulatory environment.
E) None of the given answers.

Question 39

In the situation where an entity has invested in segments that are diverse:

A) Segment information should enable the users of the financial statements to better predict the future profitability of the entity.
B) Segment information should enable the users of the financial statements to better predict the risk exposure of the entity.
C) Segment information is less useful because according to portfolio theory investments that are not correlated reduce the risk of an entity.
D) Segment information should enable the users of the financial statements to better predict the future profitability of the entity and segment information should enable the users of the financial statements to better predict the risk exposure of the entity.
E) None of the given answers.

Question 40

The following segment information relates to Tolkein Enterprises:

Applying the tests for identifying a reportable segment in accordance with AASB 8, which of the above segments qualify for reporting and do the segments satisfy the 75 per cent test?

A) Reportable segments: Mechanical engineering and retailing, 75 per cent test satisfied. No
B) Reportable segments: Industrial manufacturing, mechanical engineering and retailing; 75 per cent test satisfied. Yes
C) Reportable segments: Project consulting, mechanical engineering and retailing; 75 per cent test satisfied. Yes
D) Reportable segments: Industrial manufacturing, project consulting, mechanical engineering and retailing; 75 per cent test satisfied. No
E) None of the given answers.

Question 41

Which operating segments are considered to be reportable under AASB 8 using the segment asset qualitative threshold?

A) All segments are reportable.
B) Retail and agriculture.
C) Retail, agriculture and brewing
D) Retail, agriculture and chemicals
E) None of the given answers

Question 42

The following information relates to Baggins Ltd and its Bilbo segment.

In accordance with AASB 8 "Operating Segment", in which years is the Bilbo segment a reportable?

A) 2011, 2012 and 2013;
B) 2012, 2013 and 2014;
C) 2011 and 2012;
D) 2013 and 2014;
E) 2014 and 2015;

Question 43

Which operating segments are considered to be reportable under AASB 8 using the absolute amount of its reported profit or loss qualitative threshold?

A) All segments are reportable.
B) Retail and agriculture.
C) Retail, agriculture and brewing
D) Retail, agriculture and chemicals
E) None of the given answers

Question 44

Consider the following list of operating segments and segment results for the current reporting period relating to Legolas Ltd, and answer the question below.

What is the minimum loss (rounded to the nearest $1,000) that the Publishing segment could have made for that segment to be considered a reportable segment according to AASB 8?

A) ($39,000)
B) ($114,000)
C) ($103,000)
D) ($142,000)
E) None of the given answers.

Question 45

The following information relates to Aragorn Ltd and its Mordor segment.

In which years would the Mordor segment be classified as a reportable segment according to AASB 8?

A) 2001, 2003 and 2005.
B) 2001, 2002, 2003 and 2005.
C) 2002, 2003, 2004 and 2005.
D) 2003 and 2005
E) None of the given answers

Question 46

In accordance with AASB 8"Operating Segments", which of the following statements is incorrect?

A) The standard requires an entity to report financial and descriptive information about its reportable segments.
B) Reportable segments are operating segments or aggregations of operating segments that meet specified criteria.
C) The standard requires an entity to report a measure of operating segment profit or loss and of segment assets.
D) Reportable segments exclude business activities for which it has yet to earn revenues (e.g. start-up operations).
E) None of the given answers

Question 47

The following information relates to Gimli Ltd and its Elrond segment.

In accordance with AASB 8 "Operating Segment", in which years is the Elrond segment a reportable segment?

A) 2011, 2012 and 2013;
B) 2012, 2013 and 2014;
C) 2012 and 2014;
D) 2011 and 2015;
E) Elrond segment in reportable in all the years shown above.

Question 48

Which operating segments are considered to be reportable under AASB 8 using the segment revenue qualitative threshold?

A) All segments are reportable.
B) Retail and agriculture.
C) Retail, agriculture and brewing
D) Retail, agriculture and chemicals
E) None of the given answers

Question 49

Information about operating segments that do not meet any of the quantitative thresholds:

A) should be ignored.
B) shall be combined and disclosed in an "all other segments" category.
C) should be combined with other segments that exhibit similar economic characteristics.
D) All of the given answers.
E) shall be combined and disclosed in an "all other segments" category and should be combined with other segments that exhibit similar economic characteristics

Question 50

The following segment information is presented for Hobbitt LtD.

There are no inter-segment sales. Which segments are reportable according to the guidelines provided in AASB 114?

A) Business segments: Retailing, light manufacturing, mining, marine transport, general insurance; Geographical segments: Australia, Europe, US.
B) Business segments: Retailing, marine transport; Geographical segments: Australia, US.
C) Business segments: Light manufacturing, mining, marine transport, general insurancE. Geographical segments: Australia, US.
D) Business segments: Retailing, mining, marine transport; Geographical segments: Australia, US.
E) None of the given answers.

Question 51

AASB 8 requires reconciliation of reported segments' amounts to the entity's reported amount for which of the following items?

A) Dividend income
B) Expenses
C) Depreciation
D) Capital Expenditures
E) Liabilities

Question 52

Which of the following is not likely to be a "chief operating decision maker" as referred to in AASB 8 "Operating Segments"?

A) Executive committee of the board
B) Chief executive officer;
C) Chief operating officer;
D) Chief accountant;
E) President of the reporting entity

Question 53

The following information is provided for Gandalf LtD.

The only inter-segment sales within the entity are that the marine transport segment's revenues are 35 per cent from inter-segment sales and the light manufacturing segment has 60 per cent of its sales generated through inter-segment sales. Which segments are reportable according to the guidelines provided in AASB 114?

A) Business segments: Retailing, marine transport, general insurance; Geographical segments: Australia, US.
B) Business segments: Retailing, light manufacturing, marine transport, general insurance; Geographical segments: Australia, Europe, US.
C) Business segments: Retailing, light manufacturing, marine transport, general insurance; Geographical segments: Australia, US.
D) Business segments: Retailing, light manufacturing, mining, marine transport, general insurance; Geographical segments: Australia, Europe, US.
E) None of the given answers.

Question 54

Where the entity's primary format for reporting segments is geographical then disclosures in addition to those required when the primary format is business segments are required. These disclosures depend on:

A) Whether the segments are business segments or geographical segments.
B) The relative size of the assets invested in geographical segments.
C) The accounting policies applied to calculating the revenues, expenses, assets and liabilities of the segments.
D) Whether the segments are based on the location of assets or location of customers.
E) None of the given answers.

Question 55

Consider the following list of operating segments and segment assets for the current reporting period relating to Arwen Ltd, and answer the question below.

What is the minimum asset amount rounded to the nearest $1,000) that the Fast Food segment should have for that segment to be considered a reportable segment according to AASB 8?

A) $83,000
B) $106,000
C) $174,000
D) $184,000
E) None of the given answers.

Question 56

AASB 8 requires a number of reconciliations to be presented, including:

A) Total segment financial expenses reconciled to total entity financial expenses.
B) Total segment revenues reconciled to total entity revenues.
C) Total segment assets reconciled to total entity assets.
D) Total segment revenues reconciled to total entity revenues and total segment assets reconciled to total entity assets.
E) None of the given answers.

Question 57

In accordance with AASB 8 an operating segment is a component of an entity:

A) that engages in business activities from which it may earn revenues and incur expenses.
B) whose operating results are regularly reviewed by the entity's chief operating decision maker to make decisions about resources to be allocated to the segment and asses its performance.
C) for which discrete financial information is available.
D) All of the given answers
E) that engages in business activities from which it may earn revenues and incur expenses and whose operating results are regularly reviewed by the entity's chief operating decision maker to make decisions about resources to be allocated to the segment and asses its performance.

Question 58

Examples of liabilities not considered liabilities of a manufacturing segment by AASB 114 include:

A) Product warranty provisions.
B) Accounts payable.
C) Customer advances.
D) Liabilities relating to finance leases.
E) None of the given answers.

Question 59

In accordance with AASB 8"Operating Segments", which of the following statements is incorrect?

A) If the total external revenue reported by operating segments constitutes less than 75 per cent of the entity's revenue, additional operating segments shall be identified as reportable segments until at least 75 per cent of the entity's revenue is included in reportable segments.
B) Operating Segments that are not reportable are combined and disclosed as part of 'all other segments'.
C) If management judges that an operating segment identified as a reportable segment in the immediately preceding period is of continuing significance, information about that segment shall continue to be reported separately in the current period even if it no longer meets the criteria for a reportable segment.
D) Identification of operating segments in AASB 8 "Operating Segments" adopts a 'rules-based' approach, while its predecessor AASB 114 "Segment Reporting" adopts a 'principles-based' approach.
E) None of the given answers

Question 60

According to AASB 8, "where total external revenues attributable to reportable segments constitute less than 75 per cent of the entity's total revenues"...

A) additional reportable segments must be identified in accordance with the definition of reportable segments, until at least 75 per cent of the entity's total revenues are included in reportable segments.
B) the entity reports those segments already identified as reportable, even though they constitute less than 75 per cent of the entity's total revenues.
C) additional segments must be identified as reportable segments, even if they do not qualify as reportable segments, until at least 75 per cent of the entity's total revenues are included in reportable segments.
D) the entity considers whether total external revenues attributable to reportable segments constitute greater than 75 per cent of the entity's total external revenues, and if so, report those segments already identified.
E) the entity considers whether total assets of the reportable segments constitute greater than 75 per cent of the entity's total assets, and if so, report those segments already identified.

Question 61

The following information relates to Sam Ltd and its Eomersegment.

In accordance with AASB 8 "Operating Segment", in which years is the Eomer segment a reportable segment?

A) 2011, 2012 and 2013;
B) 2011, 2014 and 2015;
C) 2011 and 2014;
D) 2012 and 2013;
E) 2014 and 2015;