Hyams Corp. engages solely in manufacturing operations. The following data perta

Question

Hyams Corp. engages solely in manufacturing operations. The following data pertain to the operating segments for the current year: Total Operating Segment Revenues Profit Loss) Assets at 12/31 $ 13,000,000 $ 2,000,000 15,000,000 11,000,000 3,000,000 7,500,000 4,500,000 2,000,000 $35,000,000 $ 3,500,000 43,000,000 9,500,000 1,200,000 5,500,000 1,000,000) 600,000 400,000 300,000 3,000,000 2,000,000 2,000,000 Total In its segment information for the current year, how many reportable segments does Hyams have? b. Four c. Five

Explanation / Answer

A reportable segment is a segment of exploitation that meets one of the following criteria:

Applying this criteria - 1,

Total Income of the Entity = 35,000,000

10 % of 35,000,000 = $ 3,500,000

According to Income criteria, the segments with 10% i.e. $ 3,500,000 or more are reportable.

Therefore, based on revenue criteria

Segment U having revenue of $ 13,000,000;

Segment V having revenue of $ 9,500,000 and

Segment W having revenue of 5,500,000 are reportable.

Profit/ (Loss) Criteria:

The absolute amount of the segment’s reported profit or loss is 10% or more of the greater of:

Here, the entity has reported a profit when all the segments are combined is higher in absolute amount i.e. total of profits = 2,000,000+1,200,000+600,000+400,000+300,000 = 4,500,000

Whereas, total of loss in absolute amount is 1,000,000

Therefore, we will have report all the segments having profit of 10 % of 4,500,000 = 450,000 or more which are as follows:

Segment U having profit = $ 2,000,000

Segment V having profit = $ 1,200,000

Segment X having profit = $ 600,000

Now, the last criteria,Segment having 10 % or more of total combined assets = 10% or more of 43,000,000 which amounts to $ 4,300,000,

Reportable segments applying third criteria:

Segment U having assets = $ 15,000,000

Segment V having assets = $ 11,000,000

Segment X having assets = $ 7,500,000

Segment Y having assets = $ 4,500,000

Thus, finally, as per the requirement of the recognition criteria, segment fufiling any of the criteria are reportable and so are the following ones:

Segment U; Segment V, Segment X, Segment Y and Segment W are reportable .

Answer is : Five

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