Mr. Cummings, the controller, and Ms. Trevino, the CPA, are going over the final versions of the financial statements before the audit is completed. The last part of the work being discussed is the segment reporting section. Mr. Clark is questioning the comments made by Ms. Trevino regarding the use of negotiated transfer prices by the firm for the major segments being shown.
Required: Explain to Mr. Cummings the issue according to the FASB (SFAS 14).

Question

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The Answer of Mr. Cummings, the controller, and Ms. Trevino, the CPA, are going over the final versions of the financial statements before the audit is completed. The last part of the work being discussed is the segment reporting section. Mr. Clark is questioning the comments made by Ms. Trevino regarding the use of negotiated transfer prices by the firm for the major segments being shown.
Required: Explain to Mr. Cummings the issue according to the FASB (SFAS 14).

Mr Cummings, the Controller, and Ms