Question:
Levens Co. operates in several distinct business segments. The company does not have any reportable
foreign operations or major customers.
Required:
1. What is the purpose of operating segment disclosures?
2. Define an operating segment.
3. List the amounts to be reported by operating segment.
4. How would your answer to requirement 3 differ if Levens Co. prepares its segment disclosure
according to International Financial Reporting Standards?
Answer:
Requirement 1
Segment disclosures assist in analyzing and understanding financialstatements by permitting better
assessment of past performance and future prospects. Disaggregated information provides more precise
details of the uncertainties surrounding the timing and the amount of expected cash flows, because the
various segments may have different rates of profitability, degrees and types of risk, opportunities for
growth, and future capital demands.
Requirement 2
An operating segment is a component of an enterprise:
1. 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
enterprise).
2. Whose operating results are regularly reviewed by the enterprise's chief operating decision
maker to make decisions about resources to be allocated to the segment and assess its
performance.
Levens Co. operates in several distinct business segments. The company does not have any reportable
foreign operations or major customers.
Required:
1. What is the purpose of operating segment disclosures?
2. Define an operating segment.
3. List the amounts to be reported by operating segment.
4. How would your answer to requirement 3 differ if Levens Co. prepares its segment disclosure
according to International Financial Reporting Standards?
Answer:
Requirement 1
Segment disclosures assist in analyzing and understanding financialstatements by permitting better
assessment of past performance and future prospects. Disaggregated information provides more precise
details of the uncertainties surrounding the timing and the amount of expected cash flows, because the
various segments may have different rates of profitability, degrees and types of risk, opportunities for
growth, and future capital demands.
Requirement 2
An operating segment is a component of an enterprise:
1. 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
enterprise).
2. Whose operating results are regularly reviewed by the enterprise's chief operating decision
maker to make decisions about resources to be allocated to the segment and assess its
performance.
