Question

YIV, Inc., is a multidivisional corporation that makes both intersegment sales and sales to external customers. If each division qualifies as an operating segment, YIV should report segment financial information for each division when it meets which of the following criteria?

Segment revenue is 10% or more of combined revenue of all the operating segments.

An entity separately reports information about an operating segment if it satisfies one of three tests: (1) Its revenue (including sales to external customers and intersegment sales or transfers) is equal to at least 10% of the combined revenue, internal and external, of all the entity’s operating segments; (2) its assets are equal to at least 10% of the combined assets of all operating segments; and (3) the absolute amount of its reported profit or loss is equal to at least 10% of the greater, in absolute amount, of the combined reported profit of all operating segments that did not report a loss or the combined reported loss of all operating segments that did report a loss. T/F

Answer 1

The answer to the first question is:

• C) Segment revenue is 10% or more of combined revenue of all the company segments.

The answer to the second question is:

• TRUE.

Step-by-step explanation:

Option A is wrong because the 10% refers to operating profits, not consolidated profits.

Option B is wrong because you do not combine operating losses with operating profits of other segments.

Option D is wrong because the 10% refers to combined revenue, not consolidated revenue.