Operating Segments

(FAR.2644)

R. R. Ocampo
Relevant Standard

PFRS 8 – Operating Segments

Who is the chief operating
decision maker?
• The term ‘chief operating decision maker’
identifies a function, not necessarily a
manager with a specific title.
• That function is to allocate resources to
and assess the performance of the
operating segments of an entity.
• Often the chief operating decision maker
of an entity is its chief executive officer
(CEO) or chief operating officer (COO) but,
for example, it may be a group of
executive directors or others.
When is a segment reportable?

10% of RPA thresholds

• Revenue

• Profit or loss

• Assets
When is a segment reportable?

10% of RPA thresholds

• Revenue

• Profit or loss

• Assets
Answer No. 7 is letter A
Problem No. 8 Answer is letter C
Profit or Loss Threshold
The absolute measure of its reported profit or
loss is 10 per cent or more of the greater,
in absolute amount, of
(i) the combined reported profit of all P45M
operating segments that did not report a
loss and
(ii) the combined reported loss of all (P10M)
operating segments that reported a loss.

Minimum profit or loss (P45M x .1) = P4.5M

Reportable segments: A, B, C and E
Problem No. 9 Answer is letter A
Revenue Threshold
Its reported revenue, from both external
customers and intersegment sales or
transfers, is 10 per cent or more of the
combined revenue, internal and external,
of all operating segments

Minimum revenue (P1.44M x .1) = P144T

Problem No. 11 Answer is letter C
Revenue Threshold
Its reported revenue, from both external
customers and intersegment sales or
transfers, is 10 per cent or more of the
combined revenue, internal and external,
of all operating segments

Minimum revenue (P2.6M x .1) = P260T

Problem No. 12 Answer is letter B

Minimum external revenue

(P30M x .1) = P3M

Problem No. 14 Answer is letter A

Minimum external revenue

(P30M x .75) = P22.5M
Problem No. 17 Answer is letter B

% of external revenue included:

(54/72) = 75%
Problem No. 18 Answer is letter B

Segments 1 & 4
(P1.3M/P2.125M) 61%

Segments 1, 4 & 2
(P1.5M/P2.125M) 71%

Segments 1, 4, 2 & 6
(P1.7M/P2.125M) 80%

P212,500
Problem No. 20 Answer is letter C

Sales - Segment C P600,000

Traceable opex (350,000)

Allocated indirect opex

(P360,000 x 6/24) ( 90,000)

Profit – Segment C P160,000

Problem No. 21 Answer is letter
A
Sales – Division 1 P6,000,000

Traceable opex (3,800,000)

Allocated indirect opex

(P1,000,000 x .2) ( 200,000)

Profit – Division 1 P2,000,000

DIY Drill Answers
1. B
2. D
3. B
4. C
5. C
6. D
 End 