beems ringkasan materi ppt
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to accompanyAdvanced Accounting, 11th edition
by Beams, Anthony, Bettinghaus, and Smith
Chapter 15
Segment and Interim
Financial Reporting
Copyright 2012 Pearson Education,Inc. Publishing as Prentice Hall
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Segment and Interim Financial Reporting:
Objectives
1. Understand how the management approach isused to identify potentially reportableoperating segments.
2. Apply the threshold tests to identify
reportable operating segments: the revenuetest, the asset test, and the operating profittest.
3. Apply the 75% external revenue test todetermine whether additional segments mustbe reported.
4. Understand the types of information that maybe disclosed for segments and the reasonsthat the levels of disclosure may vary across
companies.
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5. Understand what segment disclosures arereconciled to the consolidated amounts.
6. Know the types of enterprise-widedisclosures related to products andservices, geographic areas of operation, andmajor customers that are required to bedisclosed.
7. Understand the similarities and differences
in the reporting of operations in an interimversus an annual reporting period.8. Compute interim-period income tax
expense.
Segment and Interim Financial Reporting:
Objectives (cont.)
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1: REPORTABLE OPERATING
SEGMENTS
Segment and Interim Financial Reporting
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Operating Segments
According to GAAP, companies that havepublicly traded debt or equity instruments mustreport on their business segments.
Reporting is based on the structure used by
management to make decisions or evaluateperformance. For example, if the companys internal reporting and
evaluation system is geographically based,
the segment reporting is geographicallybased. if the internal reporting and evaluation system
is product-line based, the segment reporting
is product-line based.
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Operating Segment (def.)
A component of a business enterprise1. Engages in business activities
Revenues and expenses tracked
Intercompany amounts included2. Operating results are reviewed by chief
operating decision maker
3. Discrete financial information is available
Excludes pension and post-retirementplans, and general corporateheadquarters
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Combining Segments
Segments with similar economiccharacteristics may be combined. Products and services
Production processes Classes of customers
Distribution systems
Regulatory environment, if applicable
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Segment and Interim Financial Reporting
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2: THRESHOLD TESTS
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Reportable Segments
Operating segments are reportable andmaterial if any one of the three threshold testsare met
1. 10% Revenue test
2. 10% Asset test3. 10% Profit or loss test
Segments not meeting any of the three tests
are combined into one "all other" category.One additional test to see if a sufficient numberof segments have been identified
1. 75% External revenue test
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10% Revenue Test
Segment reported revenue, includingintersegment revenues, is 10% or more of thecombined revenue of all operating segments.
Combined includes "all other" category Intersegment revenues are not eliminated so that
combined revenue may be > consolidated revenue
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Example: 10% Revenue Test
A segment is reportable if its total revenue 10% of
combined segment revenue.Threshold = 10%(1,500) = $150
Transportation ($360) and Oil refining ($885) arereportable segments.
Operatingsegmentrevenue
Intersegmentrevenue
Totalsegmentrevenue
Report-able?
Transportation $360 $0 $360 YesOil refining 405 480 885 Yes
Insurance 95 20 115 NoFinancing 140 0 140 NoTotal $1,000 $500 $1,500
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10% Asset Test
Segment assets are 10% or more ofcombined assets of all operating segments. Combined includes "all other"
Use the segment's identifiable assets General corporate assets
May be excluded or included
Consider organization of assets for decision-
making purposes Combined assets of segments may be less than
total corporate assets
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Example: 10% Asset Test
Operating segment'sidentifiable assets Reportable?
Transportation $ 700 YesOil refining 950 YesInsurance 180 No
Financing 1,170 YesTotal $3,000
A segment is reportable if its identifiableassets 10% of combined segment assets.
Threshold = 10%(3,000) = $300
Transportation, Oil refining, and Financingare reportable segments.
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10% Profit or Loss Test
The absolute value of the segment's reportableprofit or loss is 10% or more of the greater of:
1. The combined reported profit of all segments
reporting profits, or2. The absolute value of the combined reportedlosses of all segments reporting losses.
Operating segment profit or loss
Is not defined by GAAP Is based on the calculation used by management
for decision making May include or exclude common revenues and
costs
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Example: 10% Profit or Loss Test
Separate profitable and unprofitable segments.
A reportable segment's |profit or loss| 10% of
the greater of |combined profits or combinedlosses|. $270 is greater than $100.Threshold = 10%(270) = $27.
Transportation, Oil refining, and Finance arereportable segments.
Segmentoperating profit
Segmentoperating loss Reportable?
Transportation (100) YesOil refining 200 Yes
Insurance 20 NoFinancing 50 YesTotal 270 (100)
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3: TEST FOR ADDITIONAL
SEGMENTS
Segment and Interim Financial Reporting
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75% External Revenue Test
GAAP does not specify the number ofsegments that must be reported; however,the external revenue of reportable
segments must be at least 75% of the totalconsolidated revenue. Exclude intersegment revenues Add other segments until the 75% test is met Segments are typically aggregated so that
there are not more than ten separatesegments reported.
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Preliminary Segment Test Results:
Example (cont.)
Based on the 10% revenues, 10% assets,10% profit and loss tests: Three reportable segments
Transportation Oil refining Financing
One non-reportable segment which becomes"all other" Insurance
Now, check to see if the three are enough!
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75% External Revenue: Example
Now we examine the operating segment revenuewithout intersegment sales data. Have sufficient
segments been identified?
Threshold = 75%(1,000) = $750
$360 + 405 + 140 > $750 Yes!Operatingsegmentrevenue
Intersegmentrevenue
Totalsegmentrevenue
Report-able?
Transportation $ 360 $ 0 $ 360 YesOil refining 405 480 885 YesInsurance 95 20 115 NoFinancing 140 0 140 NoTotal $1,000 $500 $1,500
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4: SEGMENT DISCLOSURES
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Segment and Interim Financial Reporting
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Reportable Segment Disclosures
Profit or loss Total assets Revenue from external customers Revenue from other operating segments
Interest income and expense Depreciation and amortization expense Unusual items Income from equity method investments Income tax expense or benefit Extraordinary items Significant noncash items other than
depreciation
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Reportable Segment Disclosures (cont.)
Remember:GAAP is depending on the companys chiefoperating decision maker to determine the
most useful information.
Whatever data is required internally will also beused for external disclosures. However, the
company allocating expenses among theoperating segments should be continued forexternal segment disclosure purposes.
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5: RECONCILING SEGMENTS
TO CONSOLIDATED
AMOUNTS
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Segment and Interim Financial Reporting
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Reconciliations
Reconciliation schedules should beprovided to explain the differencebetween segment amounts andconsolidated totals for:
1. Reportable segment revenue toconsolidated revenue Intersegment revenues
2. Reportable segment profit and loss toconsolidated income before taxes Intersegment revenues, expenses, and
common or allocated costs
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Reconciliations (cont.)
3. Reportable segment assets toconsolidated assets
Corporate assets4. If other significant information is
disclosed, reconcile the segment
amounts with consolidated amountsfor each item
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6: ENTERPRISE-WIDE
DISCLOSURES
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Segment and Interim Financial Reporting
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Additional Disclosures
Additional enterprise-wide disclosures arerequired if not already reported with segmentinformation
1. Products and services
Revenues by product/product line, service2. Geographic information Revenues and fixed assets Domestic and foreign
And if >10%, the specific country must be disclosed3. Major customers Customer revenues > 10% Total Revenues Segment which has those revenues Not required: customer identity
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7: INTERIM FINANCIAL
REPORTING
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Segment and Interim Financial Reporting
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Accounting for Interim Periods
Are interim reports stand-aloneperiods, or an integral part of the
annual period?
GAAP has concluded that aninterim period is an integral part ofthe whole, and should be based on
the same accounting principles andpractices used in the annual
financial statements.
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Product Cost Modifications
Companies that determine Cost of Goods Sold via aphysical inventory may use the Gross Profit method
for interim periods.
LIFO inventory layers that are liquidated in an interim
period may be expensed at current cost if the layer will
be replaced by year end.
Inventory market declines are not required to be
recorded if the decline is temporary. Variances under a standard cost system that are
expected to be absorbed by year end may be deferred
at the interim date.
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Other Interim Modifications
Annual expenses may be allocated, such as
property taxes or major annual repairs.
Advertising expenses may be deferred to later
interim periods if the benefits clearly apply. Income taxes from continuing operations use an
estimated effective annual tax rate.
Income taxes on unusual, infrequent, and otheritems are calculated separately and included in the
interim period containing that item.
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8: INTERIM-PERIOD INCOME
TAXES
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Segment and Interim Financial Reporting
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Estimated Annual Effective Tax Rate
If expected annual taxable income = $120,000Taxes= $22,250 + .39(120,000100,000)= $30,050
Effec tive tax rate = 30,050 / 120,000 = 25.042%
The 25.042% rate is used for all four quarters.
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Interim Period Disclosures
Sales or gross revenues Provision for taxes
Extraordinary items, net of tax Net income and Comprehensive income
Basic and Diluted EPS Seasonal revenues, costs, or expenses Significant changes in estimated taxes Disposals, extraordinary, unusual, or
infrequent items Contingent items Changes in accounting principles or
estimates Significant change in financial position
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Other Interim Disclosures
Segment information disclosures arereduced for interim reporting
Certain information about definedbenefit pension plans
Certain information about the use offair value measurements, derivatives,
and other financial instruments Information about impairments
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SEC Interim Financial Disclosures
SEC requiresQ1, Q2, Q3 and annual reports
Quarterly requirements similar to
annual
Comparative information
Current quarter vs. prior year quarterQuarterly and year-to-date for
current and prior year
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This work is protected by United States copyright laws and
is provided solely for the use of instructors in teaching
their courses and assessing student learning.
Dissemination or sale of any part of this work(including on the World Wide Web) will destroy the
integrity of the work and is not permitted. The
work and materials from it is should never be made
available to students except by instructors using the
accompanying text in their classes. All recipients of thiswork are expected to abide by these restrictions and to
honor the intended pedagogical purposes and the needs of
other instructors who rely on these materials.
!
All rights reserved. No part of this publication may be
reproduced, stored in a retrieval system, or transmitted, in anyform or by any means, electronic, mechanical, photocopying,
recording, or otherwise, without the prior written permission of
the publisher. Printed in the United States of America.
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