[Anonymous]

I got this question right, but I am just wondering, how come D is not an acceptable answer, since it also meets the 10% rule?

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Which of the following qualifies as a reportable operating segment?

A. Corporate headquarters, which oversees $1 billion in sales for the entire company

Correct B. North American segment, whose assets are 12% of the company’s assets of all segments, and management reports to the chief operating officer

C. South American segment, whose results of operations are reported directly to the board of directors, and has 5% of the company’s assets, 9% of revenues, and 8% of the profits

D. Eastern Europe segment, which reports its results directly to the manager of the European division, and has 20% of the company’s assets, 12% of revenues, and 11% of profits

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FASB ASC 280-10-50-1 defines an operating segment as follows:

A reportable operating segment is a component of an enterprise:

That engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same enterprise),

Whose operating results are regularly reviewed by the enterprise’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance, and

For which discrete financial information is available.

FASB ASC 280-10-50-4 states, “Not every part of an enterprise is necessarily a reportable operating segment or part of an operating segment. For example, a corporate headquarters or certain functional departments may not earn revenues or may earn revenues that are only incidental to the activities of the enterprise and would not be operating segments.”

Further, FASB ASC 280-10-50-7 requires, “Generally, an operating segment has a segment manager who is directly accountable to and maintains regular contact with the chief operating decision maker to discuss operating activities, financial results, forecasts, or plans for the segment.”

[Lidis]

Determined

The reason to whom they report to regardless if they meet the 10% rule.

B report to chief Operating officer and the D segment did not.

[Author]

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