Question

ABC Company has two industry segments (auto parts and heavy equipment) and three geographic segments (Europe, Asia, and North America). The company's chief operating decision maker receives monthly statements from segment managers detailing the company's performance in both industry segments as well as the three geographic segments (5 monthly reports in total). For purposes of complying with segment reporting requirements, ABC Company must define its reportable operating segments as?

Answer 1

ABC Company's reportable operating segments by segment reporting requirements are its industry segments (auto parts, heavy equipment) and geographic segments (Europe, Asia, North America) as distinct entities since detailed performance reports are received for each of these segments.

Step-by-step explanation:

For ABC Company, its reportable operating segments would be the individual industry segments (auto parts and heavy equipment) along with the separate geographic segments (Europe, Asia, and North America) since the company's chief operating decision maker receives monthly statements on each of these segments separately. In compliance with segment reporting requirements, these are considered distinct operational areas that report financial results.

The method of classification and division is relevant here as it involves organizing data into categories. The process reflects the influence of globalization on market boundaries, which necessitates the consideration of both industry and geographic segments for a comprehensive view of an organization's performance. This detailed overview enables the company to make informed, strategic decisions and provides external analysts with critical data for assessments, including calculations of Herfindahl-Hirschman Indices (HHIs) from a global perspective.