Deck 22: Operating Segments

Question 1

Which of the following statements is incorrect?
AASB 8 requires external revenue by product to be disclosed on an entity wide basis by all entities to which AASB 8 applies:

A) unless the information has already been provided as part of the reportable segment information;
B) unless the information is not available and the cost to develop it would be excessive;
C) and must be calculated based on the financial information used to produce the entity's financial statements;
D) unless providing such information would be considered to damage the entity's competitive advantage.

Answer 1

D

Question 2

Complete the following sentence:

-
AASB 8 Operating Segments is applicable for financial reporting periods _____ on or after 1 January 2009. Early adoption is _______.

A) ending, not permitted;
B) ending, permitted;
C) beginning, not permitted;
D) beginning, permitted.

Answer 2

beginning, permitted.

Question 3

AASB 8 Operating Segments applies to:
I) public companies
II) listed entities
III) entities in the process of listing
IV) any entity who voluntarily chooses to apply it

A) I, II and III only;
B) II, III and IV only;
C) I, II and IV only;
D) I, III and IV only.

Answer 3

B

Question 4

Under AASB 8, two or more operating segments may be aggregated into a single operating segment if aggregation is consistent with the core principle of the standard, the segments have similar economic characteristics, and the segments are similar in each of the following respects:
I. $\quad$ the nature of the production processes
II. $\quad$ the markets in which the products are sold are closely related
III. $\quad$ the type or class of customer for their products and services
IV. $\quad$ the nature of the regulatory environment

A) I, II and III only;
B) I, III and IV only;
C) I, II and IV only;
D) II, III and IV only.

Question 5

Bloomsville Ltd has a board of directors that consist of a Managing Director (MD) and non-executive directors. The MD has a regular monthly meeting with the Chief Operating Officer (COO) and the managers of Bloomsville's three business units. During the meeting, each manager would present an update of their unit's financial performance. The financial information is then reviewed by the MD and the COO to assess the performance of each business unit and to make decisions related to resource allocation. In this case, who is the CODM of Bloomsville?

A) The board of directors.
B) The MD and the COO.
C) The MD, the COO, and the three managers.
D) The MD only.

Question 6

Additional segments must be identified as reportable segments until at least:

A) 75% of total entity revenue is included in reportable segments;
B) 75% of total entity assets are included in reportable segments;
C) 75% of total entity liabilities are included in reportable segments;
D) 75% of total entity equity is included in reportable segments.

Question 7

If an entity presents both consolidated financial statements and parent entity financial statements in the same financial report, it must present:

A) segment data only on the basis of the parent entity financial statements;
B) segment data only on the basis of the consolidated financial statements;
C) condensed segment data that includes revenue information only;
D) segment information on the basis of both the consolidated and the parent financial information.

Question 8

Under AASB 8 all entities to which the standard applies are required to disclose:

A) a reconciliation of total segment expenses to total consolidated expenses;
B) factors used to identify all segments;
C) the basis of accounting for any transactions between reportable segments;
D) a measure of segment liabilities.

Question 9

A key objective of providing financial reporting information by segment is:

A) to allow detailed analysis to be undertaken by users such as segment profit margin analysis;
B) to allow the user to better understand the entity's future performance;
C) to highlight poorly performing areas of an entity's business to users;
D) to allow users to better assess the entity's risks and returns.

Question 10

For financial reporting periods commencing prior to 1 January 2009, the accounting standard relating to segment reporting was:

A) AASB 8 Operating Segments;
B) AASB 114 Segment Reporting;
C) AASB 114 Operating Segments;
D) AASB 8 Segment Reporting.

Question 11

AASB 8 Operating Segments is primarily a:

A) disclosure standard;
B) measurement standard;
C) definition standard;
D) conceptual standard.

Question 12

Huey, Dewey, and Louie are the three operating segments of Donald Company. Which of the following statements is correct based on the information provided below?
$\begin{array}{|l|r|r|r|r|r|r|}\hline {\text { In } \mathbf{\$ 0 0 0}} &{\text { Huey }} & {\text { Dewey }} &{\text { Louie }} & {\begin{array}{c}\text { Total } \\\text { operating } \\\text { segments }\end{array}} &{\begin{array}{c}\text { Other } \\\text { business } \\\text { units }\end{array}} &{\begin{array}{c}\text { Total } \\\text { Donald } \\\text { Company }\end{array}} \\\hline \text { Revenue } & 275 & 130 & 410 & 815 & 295 & 1110 \\\hline \text { Profit/loss } & 100 & 30 & 185 & 315 & 60 & 375 \\\hline \text { Assets } & 355 & 215 & 750 & 1320 & 310 & 1630 \\\hline\end{array}$

A) Huey, Dewey, and Louie are reportable segments of Donald Company.
B) Only Dewey and Louie should be disclosed as reportable segments.
C) Dewey is not a reportable segment as it does not satisfy the profit/loss quantitative threshold.
D) Donald Company needs to identify another reportable segment from 'other business units' component.

Question 13

The following criteria are the key decision points in identifying an entity's component as an operating segment, except for:

A) the component's manager is part of the CODM;
B) discrete financial information are available for the component;
C) the component is able to generate revenue and incur expenses from its business activities;
D) the component's operating results are regularly reviewed by the CODM.

Question 14

AASB 8 requires disclosure in relation to which of the following?

A) the basis of accounting for all segments;
B) the nature of any difference between the measurement of the reportable segments' revenue and the entity's revenue;
C) the nature of any difference between the measurement of the reportable segments' assets and liabilities and the entity's assets and liabilities;
D) the nature and effect of all symmetrical allocations to reportable segments.

Question 15

Compared to AASB 114 Segment Reporting, AASB 8 Operating Segments can be described as being:

A) more closely aligned to other accounting standards;
B) preferred in the European Union to its predecessor;
C) less prescriptive;
D) less onerous in terms of disclosure.

Question 16

Cherry Group has operating segments in three different locations. Total assets for each segment are as follows:
Melbourne $400 000
Sydney $80 000
Adelaide $20 000
Which operating segment(s) should be disclosed as reportable segment(s) of Cherry Group?

A) All segments are reportable segments;
B) Melbourne and Sydney are the only reportable segments;
C) Sydney and Adelaide are the only reportable segments;
D) Melbourne is the only reportable segment.

Question 17

What is the reasonable maximum number of an entity's reportable segments according to the additional guidance provided in AASB 8?

A) 8;
B) 10;
C) 12;
D) There is no maximum number provided in the guidance.

Question 18

Segment disclosures are designed to:

A) combine components of consolidated financial data to provide a higher level of summarisation;
B) condense particular items of consolidated financial data into one financial statement;
C) disaggregate selected consolidated financial data;
D) aggregate revenues and expenses so that only net profit is shown for each important segment.

Question 19

Which of the following statements is correct?

A) AASB 8 requires additional disclosures about any reliance on major customers.
B) AASB 8 requires an entity to identify primary and secondary segments.
C) AASB 8 requires that the majority of a segment's revenue be from external sources in order for it to be identified as a reportable segment.
D) AASB 8 requires that the amount of each segment item reported be the measure determined in accordance with the entity's IFRS accounting policies.

Question 20

CODM refers to:

A) Chief Of Divisional Management;
B) Chief Operating Decision Maker;
C) Company Operational Documentation Manual;
D) Company Official Director Meeting.

Question 21

AASB 8 prescribes that an operating segment must be identified on the basis of:

A) geographic location;
B) predominant sources of risks and returns;
C) the way information is reported internally to the CODM;
D) the usefulness of financial information available to users.

Question 22

Under AASB 8, entities are required to provide reconciliations on the followings, except for:

A) the total of the reportable segment's measures of profit and loss to the entity's profit or loss;
B) the total of the reportable segment's equity to the entity's equity;
C) the total of the reportable segment's revenue to the entity's revenue;
D) the total of the reportable segment's liabilities to the entity's liabilities;

Question 23

Which of the following information is not required to be disclosed by entities complying with AASB 8?

A) the identity of external customers from which the entity earns at least 10% of its revenue;
B) the total of the reportable segments' liabilities to the entity's liabilities;
C) the nature and effect of the changes in measurement of segment profit or loss;
D) revenues from external customers located in foreign countries.

Question 24

Assuming the three business units below are operating segments and all revenue earned are from external customers, in which of the following scenarios does Colourband Ltd need to identify another reportable segment to be disclosed?
$\begin{array}{|c|r|r|r|r|r|r|}\hline \begin{array}{c}\text { Revenue } \\\text { in } \mathbf{\$ 0 0 0}\end{array} & \text { Red } & {\text { Blue }} & \text { Green } &{\begin{array}{c}\text { Total } \\\text { operating } \\\text { segments }\end{array}} & {\begin{array}{c}\text { Other } \\\text { business } \\\text { units }\end{array}} &{\begin{array}{c}\text { Total } \\\text { Colourband } \\\text { Ltd }\end{array}} \\\hline \text { I. } & 75 & 160 & 320 & 555 & 250 & 805 \\\hline \text { II. } & 110 & 140 & 275 & 525 & 175 & 700 \\\hline \text { III. } & 230 & 250 & 375 & 855 & 315 & 1170 \\\hline\end{array}$

A) I only.
B) I and II.
C) I and III.
D) II and III.

Question 25

One of the conditions used to determine if two or more operating segments may be aggregated into a single operating segment is:

A) the segments have the same manager in charge;
B) the aggregation is deemed to provide useful information for users;
C) the segments have similar operating results;
D) the segments have similar methods used to distribute their product or provide their services.

Question 26

Based on the information provided below, which business unit(s) should be identified as TeeVee Ltd's operating segment(s)?
$$\begin{array} { | l | c | c | c | } \hline & \text { Glee } & \text { Homrland } & \text { GSI } \\\hline \begin{array} { l } \text { Can the component } \\\text { generate revenue and } \\\text { incur expenses from its } \\\text { business activities? }\end{array} & \text { Yes } & \text { Yes } & \text { Yes } \\\hline \begin{array} { l } \text { Are the component's } \\\text { operating results } \\\text { regularly revienved by } \\\text { the CODM? }\end{array} & \text { Yes } & \text { Yes } & \text { No } \\\hline \begin{array} { l } \text { Is discrete financial } \\\text { information available } \\\text { for the component? }\end{array} & \text { No } & \text { Yes }& \text { Yes } \\\hline\end{array}$$

A) Glee only;
B) Homeland only;
C) CSI only;
D) Glee and CSI.

Question 27

Which of the followings are the requirements under AASB 8?
$$\begin{array} { | l | l | l | l | } \hline \text { I. } & \begin{array} { l } \text { Identifying primary and secondary } \\\text { segments. }\end{array} & \text { N. } & \begin{array} { l } \text { Identifying operating segments based on } \\\text { predominant sources of risks and returns. }\end{array} \\\hline \text { II. } & \begin{array} { l } \text { Disclosure of reliance on major external } \\\text { customers. }\end{array} & \text { V. } & \begin{array} { l } \text { Prepar ing segment information in } \\\text { conformity with accounting policies for } \\\text { prepar ing financial statements. }\end{array} \\\hline \text { III. } & \begin{array} { l } \text { Disclosure of a measure of profit or loss } \\\text { and total assets. }\end{array} & \text { V. } & \begin{array} { l } \text { Does not distinguish between revenues } \\\text { and expenses from internal and external } \\\text { customers. }\end{array} \\\hline\end{array}$$
Enues and expenses from internal and external customers.or preparing financial statements.

A) I, II, III.
B) II, IV, VI.
C) I, III, V.
D) II, III, VI.

Question 28

Which of the following statements is correct about the controversial issues surrounding AASB 8?

A) The management approach adopted in AASB 8 was argued to put preparers' needs ahead of users' needs.
B) Despite the objections from different parties, all IASB board members at the time unanimously agreed that AASB 8 should replace AASB 114.
C) The European Parliament was not able to endorse AASB 8 due to strong oppositions from European countries.
D) The proponents of AASB 114 argued that AASB 8 contains too many mandatory disclosure requirements compared to AASB 114.

Question 29

If an operating segment does not meet all of the thresholds of significance, it:

A) may not be designated as a reportable segment;
B) may still be designated as a reportable segment;
C) must be combined with the largest of the other segments and reported in aggregate;
D) is insignificant and cannot be reported separately.

Question 30

Segments that do not satisfy the requirements of a reportable segment must:

A) not be disclosed at all in the financial report;
B) be reported in the notes to the financial statements;
C) be combined and disclosed as 'all other segements';
D) be combined with the smallest reportable segment.