Quantitative thresholds for classification as an operating segment Our company has 5 business units that we classify as operating segments. Financial data for these units follows:

($ millions) A B C D E

Sales $13,200 $241,300 $852,373 $1,538,317 $3,470,833

Profit 2,327 (5,738) 23,833 37,533 580,833

Assets 231,837 588,333 5,458,332 2,837,334 12,327,833

a. Calculate the quantitative thresholds and determine which of these operating segments should be disclosed in the footnotes to our financial statements. Show your calculations.

b. Do the required segments meet the 75% test?

Question

Business

Keagan Lara

28 May, 09:46

Quantitative thresholds for classification as an operating segment Our company has 5 business units that we classify as operating segments. Financial data for these units follows:

($ millions) A B C D E

Sales $13,200 $241,300 $852,373 $1,538,317 $3,470,833

Profit 2,327 (5,738) 23,833 37,533 580,833

Assets 231,837 588,333 5,458,332 2,837,334 12,327,833

a. Calculate the quantitative thresholds and determine which of these operating segments should be disclosed in the footnotes to our financial statements. Show your calculations.

b. Do the required segments meet the 75% test?

+5

Answers (1)

Know the Answer?

Diya Petty · Answer 1

a) Quantitative Threshold $64,452.6 million

Segments to be disclosed is Segment E

b) No, it does not makes the 75%. It makes 57%

Explanation:

Calculation of Quantitative threshold

Total profit of profit making segments = (2,327+23,833+37,533+580,833)

=644,526 * 10% = 64,452.6

Total loss of segments = 5,733 * 10% = 573.3

Step 2 : Take higher of the two the make it threshold

Higher is $64,452.6

so any segment with a profit or loss greater than $64,452.6 is a reportable segment.

b) 75% Test

Total Revenue = $6,116,023

E = 3,470,833/6,116,023

=0.567 * 100

=57%