FAR Sample CPA Exam Questions

Weekly Review Quiz #494 – FAR: Segment Reporting

Thank you for taking our Financial Accounting and Reporting (FAR) review quiz. Check back again for five new sample FAR CPA questions to help you prepare for the exam.

Question 1

Under IFRS, all of the following are thresholds for determining if an operating segment is a reportable segment, except:

  1. The segment assets are 15% or more of the combined assets of all segments.
  2. The segment revenue is 10% or more of combined revenue of all segments.
  3. The absolute value of the segment profit or loss is 10% or more than the greater of the absolute (1) combined reported profit of all segments not reporting a loss or (2) combined reported loss of all segments reporting a loss.
  4. The segment assets are 10% or more of the combined assets of all segments.

The correct answer is: A.

A. This answer is correct because it is not one of the three thresholds for determining if an operating segment is a reportable segment. A reportable segment threshold exists if the assets are 10% or more of the combined assets of all segments, not 15% or more. The three thresholds for determining if an operating segment is a reportable segment are: (1) the segment revenue is 10% or more of combined revenue of all segments, (2) the absolute value of the segment profit or loss is 10% or more than the greater of the absolute (a) combined reported profit of all segments not reporting a loss or (b) combined reported loss of all segments reporting a loss, and (3) the segment assets are 10% or more of the combined assets of all segments.

B. This answer is incorrect because it is one of the three thresholds in determining if an operating segment is a reportable segment. An operating segment is a reportable segment if the segment revenue is 10% or more of combined revenue of all segments.

C. This answer is incorrect because it is one of the three thresholds in determining if an operating segment is a reportable segment. An operating segment is a reportable segment if the absolute value of the segment profit or loss is 10% or more than the greater of the absolute (1) combined reported profit of all segments not reporting a loss or (2) combined reported loss of all segments reporting a loss.

D. This answer is incorrect because it is one of the three thresholds in determining if an operating segment is a reportable segment. An operating segment is a reportable segment if the segment assets are 10% or more of the combined assets of all segments.

Question 2

An enterprise must separately report information about an operating segment when the segment’s revenue meets what minimum percentage of the combined revenue of the reported operating segments?

  1. 5%
  2. 10%
  3. 20%
  4. 50%

The correct answer is: B.

A. This answer is incorrect because the minimum percentage of combined revenue threshold for segment reporting is 10%.

B. This answer is correct because the test to determine when an operating segment’s revenue meets the percentage of the combined revenue of all reported operating segments uses a threshold of 10%.

C. This answer is incorrect because the minimum percentage of combined revenue threshold for segment reporting is 10%.

D. This answer is incorrect because the minimum percentage of combined revenue threshold for segment reporting is 10%.

Question 3

TAn enterprise must disclose all of the following about each reportable segment if the amounts are used by the chief operating decision maker, except

  1. Intersegment revenues.
  2. Cost of goods sold.
  3. Unusual items.
  4. Income tax expense.

The correct answer is: B.

A. This answer is incorrect. Per ASC Topic 280, the enterprise shall disclose intersegment revenues.

B. This answer is correct. Per ASC Topic 280, the enterprise shall disclose the following about each reportable segment if the specified amounts are reviewed by the chief operating decision maker:

  1. Revenues from external customers
  2. Intersegment revenues
  3. Interest revenue and expense (reported separately unless majority of segment’s revenues are from interest and management relies primarily on net interest revenue to assess performance)
  4. Depreciation, depletion, and amortization expense
  5. Unusual infrequently occurring items
  6. Equity in the net income of investees accounted for by the equity method
  7. Significant noncash item

Cost of goods sold is not specifically included as a required disclosure.

C. This answer is incorrect. Per ASC Topic 280, the enterprise shall disclose unusual items and infrequently occurring items.

D.This answer is incorrect. Per ASC Topic 280, the enterprise shall disclose income tax expense or benefit.

Question 4

Opto Co. is a publicly traded, consolidated enterprise reporting segment information. Which of the following items is a required enterprise-wide disclosure regarding external customers?

  1. The fact that transactions with a particular external customer constitute more than 10% of the total enterprise revenues.
  2. The identity of any external customer providing 10% or more of a particular operating segment’s revenue.
  3. The identity of any external customer considered to be "major" by management.
  4. Information on major customers is not required in segment reporting.

The correct answer is: A.

A. This answer is correct because disclosure is required of the fact that the company receives 10% or more of its revenue from a single customer.

B. This answer is incorrect because the identity of the customer is not a required disclosure.

C. This answer is incorrect because the identity of the customer is not a required disclosure.

D. This answer is incorrect because disclosure is required.

Question 5

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

  1. Segment approach.
  2. Operating approach.
  3. Enterprise approach.
  4. Management approach.

The correct answer is: D.

A. This answer is incorrect. Per ASC Topic 280, the method chosen for determining what information to report is referred to as the management approach.

B. This answer is incorrect. Per ASC Topic 280, the method chosen for determining what information to report is referred to as the management approach.

C. This answer is incorrect. Per ASC Topic 280, the method chosen for determining what information to report is referred to as the management approach.

D. This answer is correct. Per ASC Topic 280, the method chosen for determining what information to report is referred to as the management approach.

End of Quiz

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