An entity is permitted to aggregate operating segments that have similar economi
ID: 2542032 • Letter: A
Question
An entity is permitted to aggregate operating segments that have similar economic characteristics under certain circumstances. Which of the following circumstances would allow aggregation of Entity A into Segment B?
a.
Entity A is expected to be included in Segment Z, a new segment, in future periods.
b.
Segment B consists of retail and wholesale operations and Entity A was primarily a retail establishment but is now engaged primarily in rendering services to the parent entity.
c. Entity A was spun off from Entity C and is now owned directly by the parent entity.
d.
Entity A has recently filed bankruptcy and will be liquidated.
a.
Entity A is expected to be included in Segment Z, a new segment, in future periods.
Explanation / Answer
Answer is Option b).
As segment and entity are in related business of retail, so thta it allows for aggregation of entity A into Segment B with its similar line of business chain.
Option a) Since the Segment Z business in unknown, it cannot be taken for granted to aggregation.
Option c) Line of business was not know for both as such aggregation may not be possible if sepreate line of businesses between both.
Option d) Since it was filed for bankruptcy, similar economic conditions does not exist and aggregation is not possible.