ExpertMedium1 markMultiple Choice
CPA · Question 40 · Area II: Technical Accounting
Under ASC 280, an operating segment is considered a reportable segment if it meets which of the following quantitative thresholds?
Under ASC 280, an operating segment is considered a reportable segment if it meets which of the following quantitative thresholds?
Answer options:
A.
Its revenue is 5% or more of the combined revenue of all operating segments.
B.
Its reported profit or loss is 10% or more of the greater, in absolute amount, of the combined reported profit of all profitable segments or the combined reported loss of all segments incurring a loss.
C.
Its liabilities are 10% or more of the combined liabilities of all operating segments.
D.
Its revenue is 10% or more of the consolidated revenue of the entity.
How to approach this question
Remember the 10% Rule: 10% of Revenue (Combined), 10% of Profit/Loss (Absolute Max), or 10% of Assets.
Full Answer
B.Its reported profit or loss is 10% or more of the greater, in absolute amount, of the combined reported profit of all profitable segments or the combined reported loss of all segments incurring a loss.✓ Correct
A segment is reportable if it meets any of the 10% tests: <br/>1. Revenue >= 10% of combined revenue of all operating segments.<br/>2. Absolute Profit/Loss >= 10% of the greater of (a) combined profit of profitable segments or (b) absolute combined loss of loss segments.<br/>3. Assets >= 10% of combined assets of all operating segments.
Common mistakes
Confusing combined segment revenue with consolidated revenue; thinking liabilities are tested.
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