Question 1

Legal entities often combine to form an economic entity.

Accepted Answer

A) True 
 B)False  True

Question 2

Explain the reconciliation information AASB 8 requires for segment reporting.

Accepted Answer

AASB 8 requires companies to provide reconciliation information for segment reporting, which includes reconciling the total of the reportable segments' revenues, expenses, and results to the entity's consolidated financial statements. This reconciliation should include a description of the reconciling items, such as intersegment revenues and expenses, and any other significant reconciling items. The purpose of this requirement is to help users of the financial statements understand the relationship between the segment information and the entity's consolidated financial results, and to provide transparency and clarity in the reporting of segment information. This reconciliation information helps stakeholders to assess the performance and financial position of the company's individual segments and the overall entity.

Question 3

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.

Accepted Answer

A) True 
 B)False  False

Question 4

AASB 8 requires entities to disclose information to enable users of its financial statements to:

Accepted Answer

A)   ensure management is using the resources efficiently.
B)   evaluate the nature and financial effects of the business activities the entity is engaged in.
C)   better understand the geographical areas.
D)   determine the liabilities relating to finance leases.

Question 5

According to AASB 8 segment assets are:

Accepted Answer

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)   required to be disclosed by way of an explanation of how the assets are measured for each reportable item.

Question 6

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

Accepted Answer

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.

Question 7

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?

Accepted Answer

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

Question 8

In addition to financial information disclosures,AASB 8 also requires disclosure of non-financial information.Discuss what non-financial disclosures related to segment reporting are required under AASB 8 and the rationale for these disclosures.

Accepted Answer

The answer of In addition to financial information disclosures,AASB 8...

Question 9

What is the rationale for including a final threshold test where entities are required to include in their reportable segment at least 75 per cent of the entity's total external revenues?
 What action must an entity take if this threshold is not achieved?

Accepted Answer

The answer of What is the rationale for including a...

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

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.

Question 12

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

Accepted Answer

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.

Question 13

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.

Accepted Answer

A) True 
 B)False

Question 14

Consider the following list of operating segments and segment assets for the current reporting period relating to Arwen Ltd,and answer the question below. $$\begin{array} { | l | r | } 
\hline \text { Operating segment } & \begin{array} { l } 
\text { Segment assets } \
\text { in \$ }
\end{array} \
\hline \text { Clothing } & 250000 \
\hline \text { Household } & 350000 \
\hline \text { Fast food } & ? \
\hline \text { Multimedia } & 880000 \
\hline \text { Other operations } &  175000\
\hline
\end{array}$$ What is the minimum asset amount (rounded to the nearest $1000)that the fast food segment should have for that segment to be considered a reportable segment according to AASB 8?

Accepted Answer

A)   $83 000
B)   $106 000
C)   $174 000
D)   $184 000

Question 15

Discuss the advantages and disadvantages to the users and preparers of financial reports of disclosing segment data.

Accepted Answer

The answer of Discuss the advantages and disadvantages to the...

Question 16

An operating segment is defined by AASB 8 as:

Accepted Answer

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.

Question 17

The following information relates to All Industrials Ltd and its operating segment (in $'000s): $$\begin{array} { | l | r | r | r | r | r | r | } 
\hline &  { \text { Retail } } & { \text { Agriculture } } & { \text { Brewing } } & \text { Chemicals } & \text { Transport } & \text { Total } \\
\hline \text { Segment revenues } & & & & & & \
\hline \text { External } & 1100 & 1500 & 320 & 215 & 100 & 3235 \
\hline \text { Other segments } & 150 & 200 & 28 & 41 & 40 & 459 \
\hline \text { Segment results } & 220 & 127 & ( 30 ) & ( 360 ) & ( 20 ) & ( 63 ) \
\hline \text { Segment assets } & 360 & 260 & 50 & 50 & 51 & 771 \
\hline
\end{array}$$ Which operating segments are considered to be reportable under AASB 8 using the absolute amount of its reported profit or loss qualitative threshold?

Accepted Answer

A)   all segments
B)   retail and agriculture
C)   retail, agriculture and brewing
D)   retail, agriculture and chemicals

Question 18

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

Accepted Answer

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

Question 19

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

Accepted Answer

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) .

Question 20

Consider the following list of operating segments and segment results for the current reporting period relating to Legolas Ltd,and answer the question below. $$\begin{array} { | l | r | } 
\hline \text { Operating segment } & \begin{array} { l } 
\text { Segment assets } \
\text { profit (loss) in \$ }
\end{array} \
\hline \text { Paper products } & 317000 \
\hline \text { Office products } & ( 150000 ) \
\hline \text { Publishing } & ? \
\hline \text { Multimedia } &  ( 880000 )\
\hline \text { Other operations } & 75000\
\hline
\end{array}$$ What is the minimum loss (rounded to the nearest $1000)that the publishing segment could have made for that segment to be considered a reportable segment according to AASB 8?

Accepted Answer

A)   ($39 000) 
B)   ($114 000) 
C)   ($103 000) 
D)   ($142 000)

Exam 24: Segment Reporting