In determining whether a segment should be reported, a profit and loss test can be used.The test selects segments for reporting by:
A)only including profitable segments.
B)comparing the absolute value of a segment's profit or loss to 10% of all segments cumulative profit or cumulative loss, whichever is higher.
C)comparing the absolute value of a segment's profit or loss to 10% of all segments combined profits and losses.
D)comparing the profit or loss of a segment to 10% of all segment external revenue.

Question

In determining whether a segment should be reported, a profit and loss test can be used.The test selects segments for reporting by:
A)​only including profitable segments.
B)​comparing the absolute value of a segment's profit or loss to 10% of all segments cumulative profit or cumulative loss, whichever is higher.
C)​comparing the absolute value of a segment's profit or loss to 10% of all segments combined profits and losses.
D)​comparing the profit or loss of a segment to 10% of all segment external revenue.

Quizplus · Accepted Answer

The profit and loss test for determining reportable segments involves comparing the absolute value of a segment's profit or loss to 10% of the higher of either all segments' cumulative profit or cumulative loss. This method ensures that both significantly profitable and significantly unprofitable segments are considered for reporting, based on their relative impact on the company's overall financial performance.

In Determining Whether a Segment Should Be Reported, a Profit