ISCUSSION PROBLEMS

1. Which statement is incorrect regarding reporting b. The absolute amount of its reported profit or loss is
of segment information in accordance with PFRS 8? 10 per cent or more of the greater, in absolute
a. PFRS 8 requires that an entity should disclose amount, of (i) the combined reported profit of all
in f o r m a t i o n t o e n a b l e u s e r s o f it s f in a n c ia l operating segments that did not report a loss and
statements to evaluate the nature and financial (ii) the combined reported loss of all operating
effects of the types of business activities in which it segments that reported a loss.
engages and the economic environments in which c. Its assets are 10 per cent or more of the combined
it operates. assets of all operating segments.
b. P F R S 8 r e q u ir e s e n t it ie s t o r e p o r t s e g m e n t d. Any of these.
information using a "management approach" that
allows the financ ial statement user to review 5. Company A is a listed diversified retail C omp any. It
s e g m e n t i n f o r m a t io n f r o m t h e ' ' e y e s o f t h e has three main types of stores: general department
management." stores, liquor stores and specialist toy stores. Each of
c. PF R S 8 a pp lie s t o t he sep a rat e o r ind iv id u a l these stores has different products, customer types
fina nc ia l sta tem ent s o f a n ent ity ( and t o th e and distribution processes. Company A has identified
consolidated financial statements of a group with a three business segments: general department stores,
parent) whose debt or equity instruments are liquor stores and specialist toy stores.
traded in a public market or that files, or is in the
pro ces s of f ilin g, its ( co ns o lidate d) f ina n cia l All three business units earn most of their revenue
statements with a securities commission or other from external customers. Total consolidated revenue
regulatory organization for the purpose of issuing of Company A is P600 million.
General Toy All
any class of instruments in a public market.
Dept. Liquor stores segments
d. If an entity that is not required to apply PFRS 8 stores stores P5OM P550M
chooses to disclose information about segments Revenue P400M P100M 4m 26M
that does not comply with PFRS 8, it may describe Segment profit 15M 7M
the information as segment information. Assets 900M 200M 100M 1,200M

2. An operating segment is a component of an entity: In its segme nt inf ormat io n, how ma ny reportab le
a. That engages in business activities from which it segments does the company have?
a. T hree c. One
may earn revenues and incur expenses (including
b . Two d. Non e
revenues and expenses relating to transactions
with other components of the same entity).
b. Whose operating results are reviewed regularly by
the entity's chief operating decision maker to make 6. Celine Corporation and its divisions are engaged solely
decisions about resources to be allocated to the in manufacturing. The following data pertain to the
segment and assess its performance. industries in which operations were conducted for the
current year:
c. For which discrete financial information is
available. Operating Profit (Loss)
d. A ll o f t h e a b o v e , Division A P30,000,000
B 10,000,000
3. Which statement is incorrect regarding the term 'chief C ( 8,000,000)
operating decision maker (CODM)'? D ( 2,000,000)
a. The term identifies a function, not necessarily a E 5,000,000
manager with a specific title. I n it s c u r r e n t y e a r f in a n c ia l s t a t e m e n t s , C e l i n e
b. The function of the CODM is to allocate resources Corporation should disclose an operating segment if
to and assess the performance of the operating operating profit or loss is at least
segments of an entity. a. P 1, 00 0, 0 0 0 c. P4,5 00, 000
c. Often the CODM of an entity is its chief executive b. P 3, 50 0, 0 0 0 d. P5,500,000
officer or chief operating officer but, for example, it ,

may be a group of executive directors or others. 7. Rainee Corporation's revenue for the current year
were as follows:
d. N on e o f t he ab ov e.
Consolidated revenue per income P1,200,000
4. An entity shall report separately information about an statement
operating segment that meets which of the following Intersegment sales 180,000
quantitative thresholds? Intersegment transfers 60,000
a . I t s re p o rt ed r ev e n u e, in c lu d in g b o t h s a le s t o Combined revenues of all operating
external customers and intersegment sales or segments 1,440 000
transfers, is 10 per cent or more of the combined
revenue, internal and external, of all operating Rainee has a reportable segment if operating
segments. segment's revenues is at least
a. P144,000, c. P24,000
b . P120,000 d. P 6,000
, 8. The following information pertains to Nolte Corp. and 13. Two or more operating segments may be aggregated
its divisions for the current year. into a single operating segment if aggregation is
Sales to unaffiliated customers P2,000,000 consistent with the core principle of PFRS 8, the
Intersegment sales of products similar segments have similar economic characteristics, and
to those sold to unaffiliated the segments are similar in each of the following
customers 600,000 respects:
Interest earned on loans to other I. The nature of the products and services
operating segments 40,000 II. The nature of the production processes
III.The type or class of customer for their products
Nolte and all of its divisions are engaged solely in and services
manufacturing operations. Nolte has a reportable IV. The methods used to distribute their products or
segment if that segment's revenue is at least provide their services
a. P264,000 c. P260,000 V. The nature of the regulatory environment, for
b. P204,000 d. P200,000 example, banking, insurance or public utilities
a. I, II, II, IV and V
Use the following information for the next four questions. b. I, II, III, and IV only
c. I, III and V only
Grum Corp. a publicly owned corporation, is subject to the d. I and V only
requirements for segment reporting. In its income
statement for the current year, Grum reported revenues of 14. The equity of The Kaiaho Company is traded on a
P50,000,000, operating expenses of P47,000,000, and net recognized stock exchange. Kaiaho regularly reports
income of P3,000,000, Operating expenses include payroll the financial results of five different business units to its
costs of P15,000.000. Grum's combined identifiable assets chief operating decision maker. The relevant revenues
of all industry segments at the end of the current year for the year ended 31 December 2011 for these five
w e re P 4 0 , 0 0 0 , 0 0 0 . R e p o r t e d r e ve n u e s i n c l u d e operations, as a percentage of total external and internal
P30,000,000 of sales to external customers. revenue, were as follows:
Business
9. In its current year financial statements, Grum should operation % internal external % total
disclose major customer data if sales to any single 1 3 35 - 38
customer amount to at least 2 10 - 14° 24
a . P 300, 000 c. P4,000,000 3 15 5 20
b . P3,000,000 d. P5,000,000 4 0 9 9
5 0 9 - 9
10. Which statement is incorrect regarding 'major 28 72 100
customer information'? •
a. An entity shall provide information about the I n a c co r d an c e wi th P FRS 8 O p e r a ti n g s e g m e nts , th e
extent of its reliance on its major customers. re p ort a bl e s eg m e nts of K ai ah o ar e
b. If revenues from transactions with a single a. 1 and 2 only c. 1, 2,3 an d 4 onl y
external customer amount to 10 per cent or more b . 1,2 and 3 only d. 1,2,3,4 and 5
of an entity's revenues, the entity shall disclose
that fact, the total amount of revenues from each
such customer, and the identity of the segment or 15. Th e foll owin g s e g ments ha v e been identified for a
segments reporting the revenues. business, along with their sales. No segment qualifies
c. The entity need not disclose the identity of a major on any other criterion for determining reportable
customer or the amount of revenues that each segments except possibly for revenue. Sales for each
segment reports from that customer. segment, and the total for the company follow:
d. None of the above.
Segment Sales
11. External revenue reported by operating segments must 1 P 500,000
be at least 2 200,000
a. P22,500,000 c. P12,500,000 3 100,000
b. P15,000,000 d. P37,500,000 4 800,000
5 150,000
.
6 200,000
12. What should the entity do if the total external revenue 7 175,000
reported by operating segments constitutes less than P2,125,000 (total company sales)
75 per cent of the entity's revenue? What is the minimum number of reportable segments
a. Additional operating segments must be identified for this co m p an y?
as reportable segments. a. 5 c. 3
b. Additional operating segments must be identified b. 4 d. 2
as reportable segments even if they do not meet
the quantitative thresholds. 16. Taft Corp. discloses operating-segment information.
c. Additional operating segments must be identified The following information is available for the current
as reportable segments until at least 75 per cent of year:
the entity's revenue is included in reportable Operating Traceable
segments. Segment Sales Operating Expenses
d. All of the above.
A P1,000,000 P 600,000
B 800,000 500,000
C 600,000 350,000
2,400,000 P1,450,000
 Additional current year expenses, not included above, 17. Norte Company has three manufacturing divisions,
are as follows: each of which has been determined to be a reportable
Indirect operating expenses P360,000 segment. Common costs are appropriately allocated
on the basis of each division's sales in re lation to
General corporate expenses 240,000
Norte's aggregate sales. In the current year, Division I
had sales of P6,000,000, which was 20% of Norte's
total s ale s, and had tr aceab le operat ing cost s of
In the measure of segment profit or loss reviewed by P3, 800, 000. Nort e incurr ed ope rat ing cost s of
t h e c h ie f o p e r a t in g d e c is io n m a k e r , a p p r o p r ia t e P1,000,000 that were not directly traceable to any of
common operating expenses are allocated to segments
based on the ratio of a segment's sales to total sales, the divisions. In addition, Norte incurred interest
expense of P600,000. In r ep or t in g s eg me nt
but general corporate expenses are not. Segment C's
in fo r ma t io n -, w hat a mo u nt s ho u ld be sh o wn as
current year profit for external reporting purposes was
operatinq profit of Division. I for the current year?
a. P100,000 c. P 1 6 0, 0 0 0
a. P2,000,000 c. P1 : 880,000
b. P130,000 d. P250,000
b . P 1, 40 0, 0 0 0 d. P2,20 0,0 00

DRILL
1. Australia Company has three business segments with In its segment information, which is(are) reportable
the following Information: segment(s)?
a. Segment 1, 2, 3, 4, & 5
One Two Three b. Segment 1, 2, 3 & 4
Sales to outsiders P8,000,000 P4,000,000 P6,000,000 c. Segment 1, 2 & 4
Intersegment d. Segment 3 & 5
transfers 600,000 1,000,000 1,400,000
Interest income - The following segments have been identified for an
outsiders 400,000 500,000 600,000 entity, along with their sales. No segment qualifies on
Interest income - any other criteria for determining reportable segments.
Intersegment loans 300,000 400,000 500,000 Sales for each segment and the total for the entity
follow:
What is the minimum amount of revenue that each of
those segments must have to be ccnsicered Seg- External Inter-segment
ment Sales Sales Total
reportable'?
a. P1,950,000 c. P2,2 50. 000 1 P10,000,000 P 3,000,000 P13,000,000
0. P2,100,000 d. P2,37 0,0 00 2 2,000,000 1,500,000 3,500,000
3 2,600,000 1,100,000 3,700,000-
2 In preparing its segment-reporting schedule, the High 4 4,700,000 2,300,000 7,000,000"
Corporation has developed the following information 5 2,800,000 500,000 3,300,000
for each of its 5 segments: 6 3,000,000 700,000 3,700,000-
7 4,400,000 1,400,000 5,800,000-
Segment Revenue Expenses P30,000,000 P10,000,000 P40,000,000
1 P1,400,000 P 800,000
2 1,200,000 1,300,000 What is the minimum number of reportable segments
3 900,000 750,000 for this entity?
4 1,500,000 1,900,000 a. J c. 5
5 500,000 220,000 b, 4 d. 6
Total P5,500, 000 P4,970,000

The reportable business segment(s) using the segment

result test is (are) 5 . C D O C o m p a n y , a p u b lic ly o w n e d c o r p o r a t io n , is
a. Segm ent s 1, 2, 3, 4 & 5 subject to the requirements for segment reporting. In
b. Segment 1, 2, 3 & 4 its income statement for the current year ended, CDO
c. Segments 1, 3, & 5 reported revenue of P150,000,000, operating expenses
-d. Segments 1, 3, 4 & 5 of P10 0,000,000 and net income of P50,000,00 0.
O perating expenses include payroll costs of
P20,000,000. CDO's combined identifiable assets of all
3. Fragment Corporation and its divisions are engaged industry segments at year end were P80,000,000. The
solely in manufacturing. The following data pertain to reported revenue includes P120,000,0000 of sales to
the industries in which operations were conducted for external customers. External revenue reported by
current year: operating segments must be at least
Operating Profit (Loss) a. P11 2,50 0,00 0 c. P 9 0, 0 3 0, 0 00
Segment 1 8,000,000" b. P 37,500,000 d. P 5 0, 00 0 ,0 0 0
2 2,000,000
3 (1,300,000)
4 3,000,000
5 (1,000,000)
SUGGESTED ANSWER

1. D
2. D
3. D
4. D
5. A
6. C
7. A
8. C
9. B
10. D
11. A
12. D
13. A
14. B
15. B
16. C
17. A

DRILL
1. B
2. D
3. B
4. C
5. C
PFRS 8 Operating Segments

1. An operating segment is a component of an entity:

I. That engages in business activities from which it may earn revenues and incur expenses (including revenues and
expenses relating to transactions with other components of the same entity)
II. Whose operating results are regularly reviewed by the entity’s chief operating decision maker to make decisions
about resources to be allocated to the segment and assess its performance
III. For which discrete financial information is available
A. I and II C. I and Ill
B. II and Ill D. I, II and Ill

2. Per PFRS 8, its function is to allocate resources to and assess the performance of the operating segments of an entity.
A. Chief operating decision maker C. Segment manager
B. Executive director D. Chief executive officer

3. Statement 1. Segment reporting shall apply to the separate or individual and consolidated financial statements of entities
whose equity or debt instruments are traded in a public market.
Statement 2. If a financial report contains both the consolidated and the separate financial statements of the parent,
segment information must be presented on both the consolidated and separate financial statements.
A. True True C. False False
B. True False D. FalseTrue

4. Enterprise-wide disclosures include disclosures about: (A) Geographic areas; (B) Allocated costs
A. (A)Yes;(ß)yes C. (A)No;(B)No
B. (A) Yes; (B) No D. (A) No; (B) Yes

5. Enterprise-wide disclosures are required by publicly held companies with

Only one reportable segment More than on reportable segment

A . Yes Yes
B. Yes No
C. No Yes
D. No No

6. In financial reporting for segments of a business, an enterprise shall disclose all of the following except

A. Types of products and services from which each reportable segment derives its revenues
B. The title of the chief operating decision maker of each reportable segment
C. Factors used to identify the enterprises reportable segments
D. The basis of measurement of segment profit or loss and segment assets

7. In financial reporting for segments of a business enterprise, segment data may be aggregated

A. Before performing the 10% tests if a majority of the aggregation criteria are met
B. If the segments do not meet the 10% tests but meet all of the aggregation criteria
 C. Before performing the 10% tests if all of the aggregation criteria are met
D. If any one of the aggregation criteria are met

8. The method used to determine what information to report for business segments is referred to as the

A. Segment approach C. Enterprise approach.

B. Operating approach D. Management approach

9. Two or more operating segments may be aggregated into a single operating segment if aggregation is consistent with the
core principle of PFRS 8, and the segments are similar in each of the following respects: (choose the exception)

A. The nature of the products and services

B. The nature of the production processes
C. The type or class of customer for their products or services
D. Proximity of operations

10. Which of the following is (are) correct?

I. Operating segments that do not meet any of the quantitative thresholds may be considered reportable, and
separately disclosed, if management believes that information about the segment would be useful to users of the
financial statements.
II. An entity may combine information about operating segments that do not meet the quantitative thresholds with
information about other operating segments that do not meet the quantitative thresholds to produce a reportable
segment only if the operating segments have similar economic characteristics and share any of the aggregation
criteria.

A. I only C. I and Il
B. Il only D. None

11. Revenue of a segment includes

A. only sales to unaffiliated customers
B. sales to unaffiliated customers and interest revenue
C. sales to unaffiliated customers and intersegment sales
D. sales to unaffiliated customers and other revenue and gains

12. An operating segment is a reportable segment if

A. its operating profit is 10% or more of the combined operating profit of profitable segments
B. its operating loss is 10% or more of the combined operating.losses of segments that incurred an operating loss
C. the absolute amount of its operating profit or loss is 10% or more of the –companys combined operating profit or
loss
D. none of these

13. A segment of a business enterprise is to be reported separately when the revenues of the segment constitute 10 percent
or more of the:
A. total combined revenues of all segments reporting profits
B. total revenues of all the enterprises industry segments
C. total export and foreign sales
 D. combined net income of all segments reporting profits

14. Nenn Inc. is a multidivisional corporation which has both intersegment sales and sales to unaffiliated customers. Nenn
should report segment financial information for each division meeting which of the following criteria?
A. Segment profit or loss is 10% or more of consolidated profit or loss
B. Segment profit or loss is 10% or more of combined profit or loss of all company segments
C. Segment revenue is 10% or more of combined revenue of all the company segments
D. Segment revenue is 10% or more of consolidated revenue
Suggested answers
1. D
2. A
3. B
4. B
5. A
6. B
7. C
8. D
9. D
10. A
11. C
12. C
13. B
14. C