Following is financial information describing the six operating segments that ma
ID: 2515806 • Letter: F
Question
Following is financial information describing the six operating segments that make up Fairfield, Inc. (in thousands):
Consider the following questions independently. None of the six segments has a primarily financial nature.
a. What minimum revenue amount must any one segment generate to be of significant size to require disaggregated disclosure?
b. If only Red, Blue, and Green necessitate separate disclosure, is Fairfield disclosing disaggregated data for enough segments?
c. What volume of revenues must a single customer generate to necessitate disclosing the existence of a major customer?
d. If each of these six segments has a profit or loss (in thousands) as follows, which warrants separate disclosure? (Select all that apply.)
Segments Red Blue Green Pink Black White Sales to outside parties $ 1,822 $ 823 $ 525 $ 320 $ 132 $ 110 Intersegment revenues 27 102 120 0 27 313 Salary expense 625 390 413 323 328 73 Rent expense 150 177 92 103 53 42 Interest expense 76 70 93 60 25 16 Income tax expense (savings) 152 98 72 (97 ) (75 ) 0Explanation / Answer
a)
An operating Segment is reportable if it meets any of the following three criteria-
1 The revenue for the segment is 10% or more of the combine revenue.
2.The absolute value of profit/ loss is 10% or more of the greater of a) the combined profit of all operating segments that don't report a loss, or b)the combined loss of all operating segments that did report a loss.
3. The assets of the segment are 10% or more of the combined assets.
so. we will calculate the value of total revenue.
Total Revenue-4321 42 % 21% 14% 7% 3% 9%
On the basis of above we will report red, blue and green.
b)one of the condition is that total revenue attributable to reporting segments must be atleast 75% of the combined revenue.
since the total revenue of red, blue and green segments is more than 75%.so, fairfield disclosing disaggregated data for enough segments.
c)In my opinion, if 10% or more of enterprise revenue is derived feom sales to a single customer, disclosure of that fact and the amount of revenue from each such customer must be disclosed.
d)
Total positive result- 2015
Total negative result- (388)
So, we will higher of above for calculating the base 2015 will be the base.
on the basis of above, Red, Blue, Black and white segments are to be reported.
Red blue green pink black white sales to outside parties 1822 823 525 320 132 110 Intersegemnt revenue 27 102 120 0 27 313 Total 1849 925 645 320 159 423