Gollum Ltd provides the following segment information:

There are no inter-segment sales. Which of the segments are reportable applying only the segment result test?
A) Business segments: Industrial manufacturing, project consulting, retailing, agriculture; Geographical segments: Australia, Pacific Islands, US.
B) Business segments: Industrial manufacturing, project consulting; Geographical segments: Australia.
C) Business segments: Industrial manufacturing, project consulting, mechanical engineering, retailing, agriculture; Geographical segments: Australia, Pacific Islands, US.
D) Business segments: Industrial manufacturing, project consulting, agriculture; Geographical segments: Australia, Pacific Islands.
E) None of the given answers.

Question

Gollum Ltd provides the following segment information:

There are no inter-segment sales. Which of the segments are reportable applying only the segment result test?
A) Business segments: Industrial manufacturing, project consulting, retailing, agriculture; Geographical segments: Australia, Pacific Islands, US. 
B) Business segments: Industrial manufacturing, project consulting; Geographical segments: Australia. 
C) Business segments: Industrial manufacturing, project consulting, mechanical engineering, retailing, agriculture; Geographical segments: Australia, Pacific Islands, US. 
D) Business segments: Industrial manufacturing, project consulting, agriculture; Geographical segments: Australia, Pacific Islands. 
E) None of the given answers.

Quizplus · Accepted Answer

To determine reportable segments based on the segment result test, we need to consider the following criteria:
- The segment's revenue from sales to external customers plus revenue from transactions with other segments is 10% or more of the combined revenue of all segments.
- The segment's profit or loss is 10% or more of the greater, in absolute amount, of (a) the combined profit of all segments that did not incur a loss or (b) the combined loss of all segments that incurred a loss.

Option A is not reportable because we are given geographical segments of Pacific Islands and US but there is no information on their revenue.
Option B is not reportable because the business segments are only Industrial manufacturing and project consulting, which does not include 10% or more of the combined revenue of all segments.
Option C is not reportable because Mechanical engineering and retailing are the additional business segment which is not suitable for this question.
Option D is reportable because it includes Industrial manufacturing, project consulting, and agriculture, which are the business segments that meet the criteria for reportability. The geographical segments are Australia and Pacific Islands, which are also adequate.
Therefore, the correct answer is D.

Gollum Ltd Provides the Following Segment Information