When defining a reportable segment, which of the following conditions would be sufficient to allow a company to combine two operating segments for purposes of testing?
A) The products sold by each segment are produced in the same plant.
B) Both segments have several customers in common.
C) The segments may sell different products, but they have a similar production process.
D) Both segments are required to adhere to U.S. Department of Labor regulations regarding immigration laws.
E) Both segments are owned by the same parent company.

Question

Quizplus · Accepted Answer

Combining two operating segments for reporting purposes is allowed if the segments have similar economic characteristics, customers, production processes, and distribution methods. Option C states that the segments may sell different products, but they have a similar production process, which is a sufficient condition for combining the segments for reporting purposes. Options A, B, D, and E do not provide enough information to justify combining two operating segments.

When Defining a Reportable Segment, Which of the Following Conditions