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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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(Appendix 5.1) What criterio should a company use under the management approach to determine if a component of the company is on operating segment? Then, what tests determine whether on operating segmant is a reportable segment?

To determine

Identify the criteria that should be used by the company under the management to determine if a component of the company is an operating segment and the tests that are used to determine whether an operating segment is a reportable segment.

Explanation

Management approach is based on the way that a company’s management categorizes the segments of the company for making the operating decisions and for evaluating the company’s performance. Hence, the component of a company is an operating segment if it has the following criteria:

  • Ø  Company involves in the business activities to earn the revenues and incur the expenses.
  • Ø  Generates the operating results that are frequently reviewed by the chief decision maker of the company to make the decisions about the allocation of resources to the segment and evaluate its performance.
  • Ø  To check the availability of discrete financial information...

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