Chapter 8 solutions

Chapter 08 - Segment and Interim Reporting

CHAPTER 8 SEGMENT AND INTERIM REPORTING Answers to Problems   1. 1. D 2. C 3. A 4. C . ! ". D #. C 8. A $. ! 1%. ! 11. C 12. C 13. C &'t( re)*r re)*r+ + to m*,or m*,or -stomers -stomers// 0.S. GAA GAAP P A AS! ASC ASC 28% 28% onl re5' re5'res res +'s-losre o6 t(e tot*l *mont o6 re7enes 6rom e*-( s-( -stomer *n+ t(e '+ent't o6 t(e se)ment or se)ments reort'n) t(e re7enes. 14. D 1. D 1". A 1#. C 18. D

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Chapter 08 - Segment and Interim Reporting

1$. C I6 t(ere (*s been * m*ter'*l -(*n)e 6rom t(e l*st *nn*l reort/ tot*l *ssets/ bt not 'n+'7'+*l *ssets/ 6or e*-( oer*t'n) se)ment mst be +'s-lose+. 2%. D 21. D Determ'ne 5*nt't*t'7e t(res(ol+ n+er re7ene test 6or reort*ble se)ments S*les to ots'+ers Interse)ment tr*ns6ers Comb'ne+ se)ment re7enes 1%: -r'ter'on M'n'mm

918/%%% 3/%%% 921/%%% ; 1%: 9 2/1%%

22. A Determ'ne 5*nt't*t'7e t(res(ol+ 6or +'s-losre o6 * m*,or -stomer Re7enes 6rom * s'n)le -stomer mst be +'s-lose+ '6 t(e *mont 's 1% er-ent or more o6 -onsol'+*te+ s*les. Consol'+*te+ s*les onl 'n-l+es s*les to ots'+ers< 'nterse)ment s*les *re el'm'n*te+. Consol'+*te+ s*les -omb'ne+ s*les to ots'+ers 1%: -r'ter'on M'n'mm

93#"/%%% ; 1%: 9 3#/"%%

23. D Determ'ne reort*ble se)ments n+er t(e ro6't or loss test Tot*l oer*t'n) losses o6 91/%2%/%%% = *n+ M *re l*r)er t(*n tot*l oer*t'n) ro6'ts o6 9##%/%%%. T(s/ b*se+ on t(e 1% er-ent -r'ter'on/ *n se)ment w't( * ro6't or loss o6 91%2/%%% or more mst be se*r*tel +'s-lose+. =/ O/ *n+ P +o not meet t(*t st*n+*r+ w('le >/ M/ *n+ N +o. 24. C Determ'ne reort*ble se)ments n+er t(ree tests Re7enes Test Comb'ne+ se)ment re7enes 932/#%/%%% 1%: -r'ter'on ; 1%: M'n'mm 9 3/2#/%%%

8-2 © 2013 by McGraw-Hi !d"cation# $hi% i% proprietary materia %oey &or a"thori'ed in%tr"ctor "%e# (ot a"thori'ed &or %ae or di%trib"tion in any manner# $hi% doc"ment may not be copied) %canned) d"picated) &orwarded) di%trib"ted) or po%ted on a web%ite) in whoe or part#

Chapter 08 - Segment and Interim Reporting

Se)ments meet'n) test?A/ !/ C/ E Pro6't or >oss Test S'n-e t(ere *re no se)ments w't( * loss/ t('s test 's *l'e+ b*se+ on tot*l -omb'ne+ se)ment ro6't. Comb'ne+ se)ment ro6't 9/8%%/%%% 1%: -r'ter'on ; 1%: M'n'mm 9 8%/%%% Se)ments meet'n) test?A/ !/ C/ E Asset Test Comb'ne+ se)ment *ssets 1%: -r'ter'on M'n'mm

9"#/%%/%%% ; 1%: 9 "/#%/%%%

Se)ments meet'n) test?A/ !/ C/ D/ E '7e se)ments *re se*r*tel reort*ble. 2. D 2". ! Determ'ne m'n'mm nmber o6 reort*ble se)ments n+er #: rle T(e test to 7er'6 t(*t * s66'-'ent nmber o6 'n+str se)ments 's be'n) +'s-lose+ 's b*se+ on re7enes )ener*te+ 6rom n*66'l'*te+ -stomers. T(e 6or se)ments t(*t *re to be se*r*tel +'s-lose+ s(ow ots'+e s*les o6 92%/%%% ot o6 * tot*l 6or t(e -om*n o6 9#1%/%%%. S'n-e t('s ort'on 's onl #3.2 er-ent o6 t(e -om*n@s tot*l/ t(e # er-ent -r'ter'on est*bl's(e+ b t(e 0.S. GAAP (*s not been met. 2#. C Determ'ne e;ense *monts to be re-o)n'e+ 'n 'nter'm er'o+ Dere-'*t'on !ons

9"%/%%% ; 1B4 912%/%%% ; 1B4  

 91/%%%  3%/%%% 94/%%%

8-3 © 2013 by McGraw-Hi !d"cation# $hi% i% proprietary materia %oey &or a"thori'ed in%tr"ctor "%e# (ot a"thori'ed &or %ae or di%trib"tion in any manner# $hi% doc"ment may not be copied) %canned) d"picated) &orwarded) di%trib"ted) or po%ted on a web%ite) in whoe or part#

Chapter 08 - Segment and Interim Reporting

28. C Determ'ne net 'n-ome to be reorte+ 'n 'nter'm er'o+ In-ome *s reorte+ >ess E;tr*or+'n*r loss re-o)n'e+ 'n 6ll 'n t(e 'nter'm er'o+ 'n w('-( 't o--rs A++ Cml*t'7e e66e-t loss (*n+le+ t(ro)( *+,stment o6 ret*'ne+ e*rn'n)s b*l*n-e *t t(e be)'nn'n) o6 t(e e*r

91%%/%%% 2%/%%% 1"/%%% 9 $"/%%%

2$. C Determ'ne bons e;ense to be re-o)n'e+ 'n 'nter'm er'o+ !ons

91/%%%/%%% ; 1B4  92%/%%%

3%. C Determ'ne roert t*; e;ense to be re-o)n'e+ 'n 'nter'm er'o+ Proert t*;es

948%/%%% ; 1B4  912%/%%%

31. C orn*l entr 6or roert t*; e;ense re-o)n'e+ 'n 'nter'm er'o+ Dr. Proert t*; e;ense Pre*'+ roert t*;es Cr. C*s(

912%/%%% 3"%/%%% 948%/%%%

32. A Determ'ne COGS 'n 'nter'm er'o+ n+er >IO w't( >IO l'5'+*t'on /%%% n'ts ; 98%  94%%/%%% 3%% n'ts ; 9%  1/%%% /3%% n'ts 941/%%% 33. C /%%% n'ts ; 98%  94%%/%%% 3%% n'ts ; 982  24/"%% /3%% n'ts 9424/"%%

8-* © 2013 by McGraw-Hi !d"cation# $hi% i% proprietary materia %oey &or a"thori'ed in%tr"ctor "%e# (ot a"thori'ed &or %ae or di%trib"tion in any manner# $hi% doc"ment may not be copied) %canned) d"picated) &orwarded) di%trib"ted) or po%ted on a web%ite) in whoe or part#

Chapter 08 - Segment and Interim Reporting

34. 1% m'ntes Al t(e Pro6't or >oss Test to Determ'ne Reort*ble Oer*t'n) Se)ments C*l-l*t'on o6 ro6't or loss. Re7enes 6rom Ots'+ers

Interse)ment Oer*t'n) Tr*ns6ers E;enses Pro6't

>oss

C*r+s 91/2%%/%%% F 9 1%%/%%%  9$%%/%%%  94%%/%%% C*len+*rs $%%/%%% F 2%%/%%%  1/3%/%%%  92%/%%% Clot('n) 1/%%%/%%%  #%%/%%%  3%%/%%% !oos 8%%/%%% F %/%%%  ##%/%%%  8%/%%% Tot*l 9 #8%/%%% 92%/%%% An se)ment w't( *n *bsolte *mont o6 ro6't or loss )re*ter t(*n or e5*l to 9#8/%%% 1%: ; 9#8%/%%% 's se*r*tel reort*ble. !*se+ on t('s test/ e*-( o6 t(e 6or se)ments mst be reorte+ se*r*tel. 3. 2 m'ntes Al t(e T(ree Tests Ne-ess*r to Determ'ne Reort*ble Oer*t'n) Se)ments Revenue Test  nmbers 'n t(os*n+s Segment

Revenues

Percentage

Pl*st'-s Met*ls >mber P*er 'n*n-e Tot*l

9 "/42 2/2$4 #38 4 18" 91%/%$8

"3.#: 22.#: #.3: 4.: 1.8: 1%%.%:

reort*ble reort*ble

Profit or Loss Test  nmbers 'n t(os*n+s Segment

Revenues

Expenses

Profit

Loss

Pl*st'-s Met*ls >mber P*er 'n*n-e Tot*l

9 "/42 2/2$4 #38 4 18"

9 3/$# 1/"28 $"# "1% 1%3

92/4% """

9

reort*ble reort*ble 22$ 1

83 93/1$$

9384

S'n-e 93/1$$ 's l*r)er 'n *bsolte terms t(*n 9384/ 't w'll ser7e *s t(e b*s's 6or test'n). E*-( o6 t(e ro6't or loss 6')res w'll be -om*re+ to 931$.$% 1%: ; 93/1$$.

8-+ © 2013 by McGraw-Hi !d"cation# $hi% i% proprietary materia %oey &or a"thori'ed in%tr"ctor "%e# (ot a"thori'ed &or %ae or di%trib"tion in any manner# $hi% doc"ment may not be copied) %canned) d"picated) &orwarded) di%trib"ted) or po%ted on a web%ite) in whoe or part#

Chapter 08 - Segment and Interim Reporting

 Asset Test  nmbers 'n t(os*n+s Segment

Assets

Percentage

Pl*st'-s Met*ls >mber P*er 'n*n-e Tot*l

91/3"3 3/34# 314 "%$ #"8 9"/4%1

21.3: 2.3: 4.$: $.: 12.%: 1%%.%:

reort*ble reort*ble reort*ble

T(e l*st'-s/ met*ls/ *n+ 6'n*n-e se)ments meet *t le*st one o6 t(e t(ree tests *n+ t(ere6ore *re reort*ble. 3". 2% m'ntes A *r'et o6 Comt*t'on*l Jest'ons *bot Oer*t'n) Se)ment *n+ M*,or Cstomer Test'n) *. Tot*l re7enes 6or *'r6'el+ 'n-l+'n) 'nterse)ment re7enes *mont to 94/2%%/%%%. M'n'mm re7enes 6or re5're+ +'s-losre *re 1%: or  942%/%%%. b. D's-losre o6 oer*t'n) se)ments 's -ons'+ere+ *+e5*te onl '6 t(e se*r*tel reorte+ se)ments (*7e s*les to n*66'l'*te+ -stomers t(*t -omr'se #: or more o6 tot*l -onsol'+*te+ s*les. In t('s s't*t'on t(*t re5'rement 's met. Re+/ !le/ *n+ Green (*7e tot*l s*les to ots'+ers o6  93/13#/%%% or 8": o6 tot*l -onsol'+*te+ s*les o6 93/"""/%%%. T(s/ +'s-losre o6 t(ese t(ree se)ments wol+ be *+e5*te. -. M*,or -stomer +'s-losre 's b*se+ on * le7el o6 s*les to n*66'l'*te+ -stomers o6 *t le*st 1%: or/ 6or *'r6'el+/ 93""/"%% 93/"""/%%% ; 1%:. +. T('s test 's b*se+ on t(e )re*ter 'n *bsolte terms o6 ro6'ts or losses. In t('s roblem/ t(e tot*l ro6't o6 Re+/ !le/ Green/ *n+ &('te 91/$#1/%%% 's )re*ter t(*n t(e tot*l loss o6 P'n *n+ !l*- 931"/%%%. T(ere6ore/ *n se)ment w't( * ro6't or loss o6 91$#/1%% or more 1%: ; 91/$#1/%%% 's reort*ble. 0s'n) t('s st*n+*r+/ Re+/ !le/ !l*-/ *n+ &('te *re o6  s')n'6'-*nt s'e. 3#. 2 m'ntes Al t(e t(ree tests ne-ess*r to +eterm'ne reort*ble oer*t'n) se)ments *n+ +eterm'ne w(et(er * s66'-'ent nmber o6 se)ments 's reorte+ Problem assigned as graded homework, solution will be provided once students have submitted their answers

8-, © 2013 by McGraw-Hi !d"cation# $hi% i% proprietary materia %oey &or a"thori'ed in%tr"ctor "%e# (ot a"thori'ed &or %ae or di%trib"tion in any manner# $hi% doc"ment may not be copied) %canned) d"picated) &orwarded) di%trib"ted) or po%ted on a web%ite) in whoe or part#

Chapter 08 - Segment and Interim Reporting

38. 1 m'ntes Al m*ter'*l't tests *+ote+ b * -om*n to +eterm'ne -ontr'es to be reorte+ se*r*tel Revenue Test  s*les to n*66'l'*te+ *rt'es

0n'te+ St*tes S*'n It*l Gree-e   Tot*l

94/"1%/%%% 8%.3: 3$/%%% ".$: 2#2/%%% 4.#: 4"3/%%% 8.1: 9/#4%/%%% 1%%.%:

Long-lived Asset Test 

0n'te+ St*tes S*'n

91/8$4/%%% 1$1/%%%

83.#: 8.4:

8- © 2013 by McGraw-Hi !d"cation# $hi% i% proprietary materia %oey &or a"thori'ed in%tr"ctor "%e# (ot a"thori'ed &or %ae or di%trib"tion in any manner# $hi% doc"ment may not be copied) %canned) d"picated) &orwarded) di%trib"ted) or po%ted on a web%ite) in whoe or part#

Chapter 08 - Segment and Interim Reporting

It*l Gree-e   Tot*l

1%"/%%% 4.#: #2/%%% 3.2: 92/2"3/%%% 1%%.%:

None o6 t(e 'n+'7'+*l 6ore')n -ontr'es meets e't(er t(e re7ene or lon)K l'7e+ *sset m*ter'*l't test/ so no 6ore')n -ontr mst be reorte+ se*r*tel. Howe7er/ 'n6orm*t'on mst be resente+ 6or t(e 0n'te+ St*tes se*r*tel *n+ 6or *ll 6ore')n -ontr'es -omb'ne+. 3$. 2% m'ntes Allo-*te -osts 'n-rre+ 'n one 5*rter t(*t bene6't t(e ent're e*r *n+ +eterm'ne 'n-ome t*; e;ense *. Determ'n*t'on o6 In-ome b J*rter?Est'm*te+ Ann*l T*; R*te 4%: 1st J*rter 2n+ J*rter 3r+ J*rter 4t( J*rter  S*les 91/%%%/%%% 91/2%%/%%% 91/4%%/%%% 91/"%%/%%% Cost o6 )oo+s sol+ 4%%/%%% 48%/%%% %/%%% "%%/%%% A+m'n'str*t'7e -osts 1#/%%% 18%/%%% 18/%%% 1$/%%% A+7ert's'n) -osts 2/%%% 2/%%% 2/%%% 2/%%% E;e-t'7e bonses 2%/%%% 2%/%%% 2%/%%% 2%/%%% Pro7's'on 6or b*+ +ebts 13/%%% 13/%%% 13/%%% 13/%%% Ann*l m*'nten*n-e -osts 1/%%% 1/%%% 1/%%% 1/%%% PreKt*; 'n-ome 932/%%% 94"#/%%% 9$2/%%% 9#32/%%% In-ome t*;L 14%/8%% 18"/8%% 23"/8%% 2$2/8%% Net 'n-ome 9211/2%% 928%/2%% 93/2%% 943$/2%% L C*l-l*t'on o6 'n-ome t*; b 5*rter PreKt*; 'n-ome t('s 5*rter 932/%%% Cml*t'7e reKt*; 'n-ome 932/%%% Est'm*te+ 'n-ome t*; r*te ; 4%: Cml*t'7e 'n-ome t*; to be re-o)n'e+ to +*te 914%/8%% Cml*t'7e 'n-ome t*; re-o)n'e+ 'n e*rl'er er'o+s K%K In-ome t*; t('s 5*rter 914%/8%%

94"#/%%% 9$2/%%% 9#32/%%% 981$/%%% 91/411/%%% 92/143/%%% ; 4%: ; 4%: ; 4%: 932#/"%%

9"4/4%%

98#/2%%

14%/8%% 918"/8%%

32#/"%% 923"/8%%

"4/4%% 92$2/8%%

b. Determ'n*t'on o6 In-ome b J*rter?C(*n)e 'n Est'm*te+ Ann*l T*; R*te PreKt*; 'n-ome In-ome t*;LL Net 'n-ome

1st J*rter 2n+ J*rter 3r+ J*rter 4t( J*rter  932/%%% 94"#/%%% 9$2/%%% 9#32/%%% 14%/8%% 18"/8%% 2%8/8% 2#8/1"% 9211/2%% 928%/2%% 9383/42% 943/84%

8-8 © 2013 by McGraw-Hi !d"cation# $hi% i% proprietary materia %oey &or a"thori'ed in%tr"ctor "%e# (ot a"thori'ed &or %ae or di%trib"tion in any manner# $hi% doc"ment may not be copied) %canned) d"picated) &orwarded) di%trib"ted) or po%ted on a web%ite) in whoe or part#

Chapter 08 - Segment and Interim Reporting

3$. (continued) LL C*l-l*t'on o6 'n-ome t*; b 5*rter PreKt*; 'n-ome t('s 5*rter 932/%%% Cml*t'7e reKt*; 'n-ome 932/%%% Est'm*te+ 'n-ome t*; r*te ; 4%: Cml*t'7e 'n-ome t*; to be re-o)n'e+ to +*te 914%/8%% Cml*t'7e 'n-ome t*; re-o)n'e+ 'n e*rl'er er'o+s K%K In-ome t*; t('s 5*rter 914%/8%%

94"#/%%% 9$2/%%% 9#32/%%% 981$/%%% 91/411/%%% 92/143/%%% ; 4%: ; 38: ; 38: 932#/"%%

93"/18%

9814/34%

14%/8%% 918"/8%%

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3"/18% 92#8/1"%

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2n+ J.

3r+ J.

2%13 4 t( J.

1st J.

91%/%%% 912/%%% 914/%%% 91"/%%% 918/%%% 3/8%% 2/%%% 4/2%% 1/"8% 92/2%

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/2%% 2/"%% "/2%% 2/48% 93/#2%

"/%%% 3/%%% #/%%% 2/8%% 94/2%%

#/4%% 3/2%% #/4%% 2/$"% 94/44%

Net 'n-ome 'n t(e se-on+ 5*rter o6 2%13 's 94/"% 92%/%%%  $/%%%  3/4%%  9#/"%%  3/%4% 4%:  94/"%. T(e *--ont'n) -(*n)e 's re6le-te+ 'n t(e se-on+ 5*rter o6 2%13/ w't( e*rK toK+*te 'n6orm*t'on/ *n+ -om*r*t'7e 'n6orm*t'on 6or s'm'l*r er'o+s 'n 2%12 *s 6ollows

Net 'n-ome Net 'n-ome er -ommon s(*re

T(ree Mont(s En+e+ ne 3% 2%12 2%13 93/12% 94/"% 93.12 94."

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8-. © 2013 by McGraw-Hi !d"cation# $hi% i% proprietary materia %oey &or a"thori'ed in%tr"ctor "%e# (ot a"thori'ed &or %ae or di%trib"tion in any manner# $hi% doc"ment may not be copied) %canned) d"picated) &orwarded) di%trib"ted) or po%ted on a web%ite) in whoe or part#

Chapter 08 - Segment and Interim Reporting

41. 1% m'ntes >IO l'5'+*t'on 'n 'nter'm reort Determ'n*t'on o6 CostKo6KGoo+sKSol+ *n+ Gross Pro6't S*les 11%/%%% n'ts  92% CostKo6K)oo+sKsol+ 1%%/%%% n'ts  914 1%/%%% n'ts  91 rel*-ement -ost Gross ro6't

92/2%%/%%% 91/4%%/%%% 1%/%%%

1/%/%%% 9"%/%%%

orn*l Entr'es to Re-or+ S*les *n+ CostKo6KGoo+sKSol+ Dr. C*s( or A--onts Re-e'7*ble Cr. S*les Re7ene Dr. CostKo6K)oo+sKsol+ Cr. In7entor E;-ess o6 Rel*-ement Cost o7er  H'stor'-*l Cost o6 >IO >'5'+*t'on

92/2%%/%%% 92/2%%/%%% 91/%/%%% 91/2%/%%% 3%/%%%

To re-or+ -ostKo6K)oo+sKsol+ w't( * ('stor'-*l -ost o6 91/2%/%%% *n+ *n e;-ess o6 rel*-ement -ost o7er ('stor'-*l -ost 6or be)'nn'n) 'n7entor l'5'+*te+ o6  93%/%%% 91  912 ; 1%/%%% n'ts. De7elo or S'lls Rese*r-( C*se 1?Se)ment Reort'n) "% m'ntes T('s *ss')nment re5'res t(e st+ent to sele-t * -om*n *n+ 6'n+ t(e note on oer*t'n) se)ments 'n t(*t -om*n@s *nn*l reort. T(e resonses to t('s *ss')nment w'll +een+ on t(e -om*n sele-te+ b t(e st+ent 6or  *n*ls's. Rese*r-( C*se 2?Inter'm Reort'n) "% m'ntes T('s *ss')nment re5'res st+ents to sele-t * -om*n/ 6'n+ t(e most re-ent 5*rterl reort 6or t(*t -om*n/ *n+ t(en +eterm'ne w(et(er t(e -om*n ro7'+es t(e m'n'mm +'s-losre re5're+ *s l'ste+ 'n t(e te;t. T(e resonses to t('s *ss')nment w'll +een+ on t(e -om*n sele-te+ b t(e st+ent 6or *n*ls's.

8-10 © 2013 by McGraw-Hi !d"cation# $hi% i% proprietary materia %oey &or a"thori'ed in%tr"ctor "%e# (ot a"thori'ed &or %ae or di%trib"tion in any manner# $hi% doc"ment may not be copied) %canned) d"picated) &orwarded) di%trib"ted) or po%ted on a web%ite) in whoe or part#

Chapter 08 - Segment and Interim Reporting

Rese*r-( C*se 3?Oer*t'n) Se)ments "% m'ntes T('s *ss')nment re5'res st+ents to 6'n+ t(e note on oer*t'n) se)ments 'n e*-( -om*nQs *nn*l reort/ +eterm'ne t(ree 'tems o6 'n6orm*t'on *nswer  t(ree 5est'ons 6rom t(ose notes/ *n+ re*re * wr'tten smm*r o6 t(e'r  6'n+'n)s. T(e r'm*r ob,e-t'7e o6 t('s re5'rement 's to (el st+ents +e7elo t(e'r *b'l't to resent s-( 6'n+'n)s 'n * wr'tten 6orm*t. In *nswer'n) t(ese 5est'ons/ st+ents w'll be-ome 6*m'l'*r w't( t(e +'66erent 6orm*ts *n+ term'nolo) se+ b -om*n'es 'n ro7'+'n) oer*t'n) se)ment 'n6orm*t'on. T(e *nswers to t(ese 5est'ons w'll -(*n)e +een+'n) on t(e most re-ent *nn*l reort *7*'l*ble on t(e -om*n@s webs'te. T(e 6ollow'n) )ener*l obser7*t'ons 'n+'-*te (ow t(ese 5est'ons m')(t be *nswere+. 1.

The two most important operating segments in terms of percentage of  total revenues

T(e *nswer to t('s 5est'on 's +eterm'ne+ b -*l-l*t'n) t(e r*t'o se)ment re7enesBtot*l se)ment re7enes 6or e*-( se)ment o6 e*-( -om*n. Com*n'es m')(t se +'66erent terms to +es-r'be re7enes 'n-l+'n) net s*les *n+ net s*les to e;tern*l -stomers. Com*n'es *re re5're+ to +'s-lose bot( re7enes 6rom s*les to e;tern*l -stomers *n+ re7enes 6rom 'nterse)ment s*les. T('s 5est'on s(ol+ be *nswere+ s'n) re7enes 6rom s*les to e;tern*l -stomers '6 reorte+ se*r*tel. In 2%1%/ e*-( o6 t(e 6or -om*n'es +e6'ne+ oer*t'n) se)ments on t(e b*s's o6 ro+-tsBser7'-es. 2.

The two operating segments with the largest growth in revenues

T('s 5est'on 's *nswere+ b -*l-l*t'n) t(e r*t'o -rrent e*r  se)ment re7enes  re7'os e*r se)ment re7enesBre7'os e*r  se)ment re7enes 6or e*-( se)ment o6 e*-( -om*n. 3.

The two most profita!le operating segments in terms of profit margin

T('s 5est'on 's *nswere+ b -*l-l*t'n) t(e r*t'o se)ment ro6'tBse)ment re7enes 6or e*-( se)ment o6 e*-( -om*n *)*'n s'n) re7enes 6rom s*les to e;tern*l -stomers '6 se*r*tel reorte+. Se)ment ro6't )oes n+er * 7*r'et o6 n*mes 'n-l+'n) oer*t'n) e*rn'n)s/ 'n-ome 6rom -ont'n'n) oer*t'ons/ st*n+*r+ m*r)'n/ *n+ oer*t'n) ro6't. Some -om*n'es m')(t ro7'+e 'n6orm*t'on 6or more t(*n one me*sre o6 ro6't/ e.)./ 'n-ome be6ore 'n-ome t*;es *n+ oer*t'n) 'n-ome/ 'n w('-( -*se t(e 'nstr-tor m')(t w's( to 'n+'-*te w('-( me*sre o6 ro6't to -ons'+er 'n *nswer'n) t('s 5est'on. T(ere 's no r')(t or wron) me*sre o6 ro6't to se. Gener*l Ele-tr'- +oes not 'n-l+e se)ment ro6't 'n 'ts oer*t'n) se)ment note/ bt 'nste*+ 'n 2%1% re6ers t(e re*+er to * Smm*r o6 Oer*t'n) Se)ments t*ble on *)e 3$ o6 t(e *nn*l reort/ w('-( 's *rt o6 M*n*)ementQs D's-ss'on *n+ An*ls's.

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Chapter 08 - Segment and Interim Reporting

A6ter re7'ew'n) t(e 'n6orm*t'on ro7'+e+ b e*-( o6 t(ese -om*n'es 'n 'ts se)ment note/ 'nstr-tors m')(t w's( to *++ *++'t'on*l 5est'ons to t('s *ss')nment. or e;*mle/ +o t(ese -om*n'es se )ener*ll *--ete+ *--ont'n) r'n-'les 'n re*r'n) se)ment 'n6orm*t'on Does e*-( -om*n ro7'+e * re-on-'l'*t'on to -onsol'+*te+ tot*ls Rese*r-( C*se 4?Com*r*b'l't o6 Geo)r*('- Are* In6orm*t'on "% m'ntes T('s *ss')nment re5'res st+ents to 6'n+ t(e note on )eo)r*('- *re*s 'n e*-( -om*nQs *nn*l reort *n+ t(en re*re * reort +es-r'b'n) t(e -om*r*b'l't o6 t('s 'n6orm*t'on. In re*r'n) t('s *ss')nment/ st+ents w'll see t(e +'66erent 6orm*ts se+ b -om*n'es 'n ro7'+'n) t('s 'n6orm*t'on/ *n+ t(e +'66erent le7els o6 +et*'l on )eo)r*('- *re*s ro7'+e+. T(e -om*r*b'l't o6 t('s 'n6orm*t'on w'll -(*n)e +een+'n) on t(e most re-ent *nn*l reort *7*'l*ble on t(e -om*n@s webs'te. T(e 6ollow'n) -om*r'son b*se+ on t(e 2%1% *nn*l reorts reresents t(e te o6  *n*ls's st+ents m')(t er6orm 'n sol7'n) t('s *ss')nment. Geo)r*('- Are*s Reorte+ b or P(*rm*-et'-*l Com*n'es !r'stolKMers S5'bb El' >'ll Mer- P6'er   0.S. Eroe K K **n/ As'* P*-'6'-/ *n+ C*n*+* K >*t'n Amer'-*/ M'++le E*st/ *n+ A6r'-* Emer)'n) M*rets K &orl+ Ot(er

0.S. Eroe K K

0.S. K EBMEBA K

0.S. K K De7eloe+ Eroe

K **n

K **n

K K

K

K K K

K K Emer)'n) M*rets K De7eloe+ Rest

Ot(er

Ot(er

o6

K

T(e onl )eo)r*('- *re* t(*t -*n be +'re-tl -om*re+ *-ross t(ese 6or  (*rm*-et'-*l -om*n'es 's t(e 0n'te+ St*tes. !r'stolKMers S5'bb ro7'+es somew(*t more +et*'le+ 'n6orm*t'on t(*n t(e ot(er -om*n'es. Onl El' >'ll *n+ Mer- reort *n 'n+'7'+*l -ontr **n ot(er t(*n t(e 0.S. Isses t(*t -ol+ be +'s-sse+ 'n-l+e +'66erent 5*nt't*t'7e t(res(ol+s se+ b -om*n'es 'n +eterm'n'n) w(*t 's * m*ter'*l -ontr/ *n+ t(e 6*-t t(*t +'s-losre o6 )eo)r*('- *re*s *))re)*te+ *bo7e t(e 'n+'7'+*l -ontr le7el e.)./ EBMEBA/ Emer)'n) M*rets 's not re5're+. One -*n *ssme t(*t !r'stolKMers S5'bb +oes not (*7e * m*ter'*l *mont o6 re7enes or *ssets 'n *n s'n)le -ontr *n+ 7olnt*r'l ro7'+es 'n6orm*t'on on * more *))re)*te+/ re)'on*l b*s's. T(e s*me *e*rs to be tre 6or P6'er. El' >'ll *n+ Mer- ro7'+e 'n6orm*t'on 6or * -omb'n*t'on o6 bot( 'n+'7'+*l -ontr'es **n *n+ *))re)*te+ re)'on*l *re* Eroe/ EBMEBA. P6'er (*s er(*s t(e most +'66erent b*s's 6or +eterm'n'n) )eo)r*('- *re*s/ 6o-s'n) on +e7eloe+ 7s. emer)'n) m*rets.

8-12 © 2013 by McGraw-Hi !d"cation# $hi% i% proprietary materia %oey &or a"thori'ed in%tr"ctor "%e# (ot a"thori'ed &or %ae or di%trib"tion in any manner# $hi% doc"ment may not be copied) %canned) d"picated) &orwarded) di%trib"ted) or po%ted on a web%ite) in whoe or part#

 

Chapter 08 - Segment and Interim Reporting

Rese*r-( C*se ?&'t('n In+str Com*r'son o6 Se)ment In6orm*t'on "% m'ntes T(e rose o6 t('s *ss')nment 's to s(ow st+ents (ow se)ment 'n6orm*t'on -*n be se+ to )*'n 'ns')(ts 'nto t(e n*tre *n+ lo-*t'on o6 * -om*n@s oer*t'ons/ *n+ )'7e t(em *n oortn't to -om*re *n+ -ontr*st t('s 'n6orm*t'on 6or two -om*n'es 'n t(e s*me 'n+str. T(e resonses to t('s *ss')nment w'll +een+ on t(e -om*n'es sele-te+ b t(e st+ent 6or *n*ls's. St+ents s(ol+ +'s-ss bot( t(e oer*t'n) se)ments *n+ )eo)r*('- *re*s 'n w('-( t(e -om*n'es oer*te. T(e m')(t +'s-ss t(e e;tent to w('-( t(e two -om*n'es -omete w't( e*-( ot(er 'n terms o6 ro+-t l'nes or )eo)r*('- *re*s/ *s well *s t(e e;tent to w('-( t('s 'n6orm*t'on -*n be -om*re+. or e;*mle/ '6 one -om*n +e6'nes oer*t'n) se)ments on t(e b*s's o6 ro+-ts *n+ *not(er -om*n 'n t(e s*me 'n+str +e6'nes oer*t'n) se)ments )eo)r*('-*ll/ me*n'n)6l -om*r'sons between t(e two -om*n'es w'll be +'66'-lt to m*e. A--ont'n) St*n+*r+s C*se 1 ?Se)ment Reort'n) 1 m'ntes Sor-e o6 )'+*n-e AS! ASC 28%K1%KK2 Se)ment Reort'n)< O7er*ll< Imlement*t'on G'+*n-e *n+ Illstr*t'ons< Oer*t'n) Se)ments K E5't Met(o+ In7estees ASC 28%K1%KK2 st*tes An e5't met(o+ 'n7estee -ol+ be -ons'+ere+ *n oer*t'n) se)ment/ '6/ n+er t(e se-'6'- 6*-ts *n+ -'r-mst*n-es be'n) -ons'+ere+/ 't meets t(e +e6'n't'on o6 *n oer*t'n) se)ment/ e7en t(o)( t(e 'n7estor (*s no -ontrol o7er t(e er6orm*n-e o6 t(e 'n7estee. T(s/ 'n resonse to t(e 5est'ons *se+ 'n t(e -*se * *n e5't met(o+ 'n7estment -*n be tre*te+ *s *n oer*t'n) se)ment 6or  6'n*n-'*l reort'n) roses/ b n+er t(e -on+'t'ons t(*t 't meets t(e +e6'n't'on o6 *n oer*t'n) se)ment/ t(*t 's/ 1 't en)*)es 'n bs'ness *-t'7't'es 6rom w('-( 't e*rns re7enes *n+ 'n-rs e;enses/ 2 t(e -('e6 oer*t'n) +e-'s'on m*er  re)l*rl re7'ews 'ts oer*t'n) reslts to *ssess er6orm*n-e *n+ m*e resor-e *llo-*t'on +e-'s'on/ *n+ 3 'ts +'s-rete 6'n*n-'*l 'n6orm*t'on 's *7*'l*ble.

8-13 © 2013 by McGraw-Hi !d"cation# $hi% i% proprietary materia %oey &or a"thori'ed in%tr"ctor "%e# (ot a"thori'ed &or %ae or di%trib"tion in any manner# $hi% doc"ment may not be copied) %canned) d"picated) &orwarded) di%trib"ted) or po%ted on a web%ite) in whoe or part#

Chapter 08 - Segment and Interim Reporting

A--ont'n) St*n+*r+s C*se 2?Inter'm Reort'n) 1 m'ntes Sor-e o6 )'+*n-e AS! ASC 2#%K1%K%K" Inter'm Reort'n)< O7er*ll< D's-losre< Cont'n)en-'es Cont'n)en-'es t(*t -ol+ be e;e-te+ to *66e-t t(e 6*'rness o6 resent*t'on o6 6'n*n-'*l +*t* *t *n 'nter'm +*te mst be +'s-lose+ 'n 'nter'm reorts 'n t(e s*me m*nner re5're+ 6or *nn*l reorts. T(e m*ter'*l't o6 * -ont'n)en- s(ol+ be ,+)e+ 'n rel*t'on to *nn*l 6'n*n-'*l st*tements. An*ls's C*se?&*lm*rt Inter'm *n+ Se)ment Reort'n) "% m'ntes 1.  Assess the seasonal nature of "almart#s sales and income for the compan$  as a whole and !$ operating segment

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Chapter 08 - Segment and Interim Reporting

2.  Assess "almart#s profita!ilit$ !$ %uarter and !$ se gment Note 18 -*n be se+ to *ssess ro6't*b'l't 'n terms o6 ro6't m*r)'n Net 'n-omeBNet s*les b 5*rter. 's-*l e*r En+e+ *n*r 31/ 2%11   J1 J2 J3 J4  Amounts in millions Consol'+*te+ net 'n-ome 9 3/444 9 3/#4# 9 3/$% 9 /1#8 Net s*les $$/%$# 1%3/%1" 1%1/23$ 11/"%% Net 'n-omeBNet s*les 3.48: 3."4: 3.: 4.48: T(ese reslts 'n+'-*te t(*t ro6't m*r)'ns *re (')(est 'n t(e 6ort( 5*rter o6  t(e e*r/ t(e 5*rter w't( t(e l*r)est er-ent*)e o6 tot*l s*les. Note 1" -*n be se+ to *ssess ro6't*b'l't 'n terms o6 oer*t'n) ro6't m*r)'n Oer*t'n) 'n-omeBRe7enes *n+ retrn on *ssets Oer*t'n) 'n-omeBTot*l *ssets b se)ment.

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8-1+ © 2013 by McGraw-Hi !d"cation# $hi% i% proprietary materia %oey &or a"thori'ed in%tr"ctor "%e# (ot a"thori'ed &or %ae or di%trib"tion in any manner# $hi% doc"ment may not be copied) %canned) d"picated) &orwarded) di%trib"ted) or po%ted on a web%ite) in whoe or part#

Chapter 08 - Segment and Interim Reporting

E;-el C*se?Co-*KCol* Geo)r*('- Se)ment In6orm*t'on "% m'ntes 1. T(e r*t'os re5're+ to be -*l-l*te+ 6or t(e Co-*KCol* Com*n *re *s 6ollows Percentage of total net operating revenues Eurasia & Africa Europe Latin America North America !acific

2%1%

2%%$

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6.96% 14.30% 11.22% 30.2% 14.36%

6.90% 17.30% 10.61% 2.62% 14.41%

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Percentage growth in net operating revenues Eurasia & Africa Europe Latin America North America !acific

&'' to &''  21.19% "0.81% 27.03% 42.99% 19.63%

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&'' 38.34%

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6.70% 8.36% 13.7% 38.8%

2.44% 3.91% 21.64% 38.6%

2. T(ere 's no r')(t or wron) *nswer to t('s 5est'on. St+ents -ol+ *r)e t(*t >*t'n Amer'-* *n+ Eroe wol+ be t(e *re*s o6 t(e worl+ 'n w('-( to e;*n+ be-*se ro6't m*r)'n 's (')(est 'n t(ese *re*s. T(ere wol+ seem to be more room to e;*n+ 'n >*t'n Amer'-* )'7en t(*t t('s *re* (*s * sm*ller er-ent*)e o6 tot*l re7enes. In *++'t'on/ re7ene )rowt( 'n Eroe (*s been ne)*t'7e 'n t(e most re-ent two e*rs/ so e;*ns'on m')(t not be 6e*s'ble 'n t('s re)'on. Er*s'* U A6r'-* *n+ P*-'6'- *lso (*7e rel*t'7el (')( ro6't m*r)'ns. T(e -om*n )ener*tes t(e sm*llest er-ent*)e o6 tot*l re7enes 'n Er*s'* U A6r'-*/ so er(*s t(ere 's *n oortn't 6or )rowt( 'n t('s *re*.

8-1, © 2013 by McGraw-Hi !d"cation# $hi% i% proprietary materia %oey &or a"thori'ed in%tr"ctor "%e# (ot a"thori'ed &or %ae or di%trib"tion in any manner# $hi% doc"ment may not be copied) %canned) d"picated) &orwarded) di%trib"ted) or po%ted on a web%ite) in whoe or part#

Chapter 08 - Segment and Interim Reporting

3. T(ere 's * )re*t +e*l o6 nonK*--ont'n) 'n6orm*t'on t(*t one wol+ nee+ to +eterm'ne * se-'6'- re)'on o6 t(e worl+ 'n w('-( to 6o-s e;*ns'on. or  e;*mle/ one m')(t nee+ to )*t(er 'n6orm*t'on to *nswer t(e 6ollow'n) 5est'ons •

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Is t(ere * s66'-'entl l*r)e ol*t'on w't( eno)( +'sos*ble 'n-ome to be *ble to r-(*se t(e -om*n@s ro+-ts Are r*w m*ter'*ls *7*'l*ble lo-*ll Is t(ere * wellK+e7eloe+ tr*nsort*t'on 'n6r*str-tre t(*t wol+ *llow t(e ro+-ts to be bro)(t to -onsmers *t * re*son*ble -ost Do lo-*l -stoms/ -ltre/ rel')'on/ et-. *66e-t +r'n'n) (*b'ts/ ese-'*ll t(e -onsmt'on o6 so6t +r'ns

8-1 © 2013 by McGraw-Hi !d"cation# $hi% i% proprietary materia %oey &or a"thori'ed in%tr"ctor "%e# (ot a"thori'ed &or %ae or di%trib"tion in any manner# $hi% doc"ment may not be copied) %canned) d"picated) &orwarded) di%trib"ted) or po%ted on a web%ite) in whoe or part#