AICPA CPA-Financial Exam - Topic 3 Question 13 Discussion

Actual exam question for AICPA's CPA-Financial exam

Question #: 13
Topic #: 3

YIV, Inc. is a multidivisional corporation, which has both intersegment sales and sales to unaffiliated customers. YIV should report segment financial information for each division meeting which of the following criteria?

ASegment operating profit or loss is 10% or more of consolidated profit or loss.

BSegment operating profit or loss is 10% or more of combined operating profit or loss of all company segments.

CSegment revenue is 10% or more of combined revenue of all the company segments.

DSegment revenue is 10% or more of consolidated revenue.

Show Suggested Answer

Suggested Answer: C

Choice 'c' is correct. Segment revenue is 10% or more of combined revenue of all the company segments.

Rule: To be significant enough to report on, a segment must be at least 10% of:

1. Combined revenues (whether intersegment or affiliated customers) or

2. Operating profit (of all segments not having an operating loss), or

3. Identifiable assets.

Choice 'a' is incorrect. Rule is 10% of 'operating profit,' not 'consolidated profit.'

Choice 'b' is incorrect. Segments with 'operating losses' are not combined with those having 'operating profits' in determining a segment.

Choice 'd' is incorrect. 'Consolidated revenue' would not include 'intersegment revenue.' Rule is 'combined revenue,' not 'consolidated revenue.'

by Mirta at May 09, 2022, 04:45 PM

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5 months ago

Hmm, I'm not 100% sure about this one. The options seem a bit similar, so I'll have to think it through carefully before answering.

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