Purpose of identifying operating business segments

Assignment Help Accounting Basics
Reference no: EM13976033 , Length: 7

QUESTION 1:

RyrieTavishBhd has four operating segments. The following information relates to the year ended 30 April 2014:

 

External Revenue

Profit/(Loss)

Assets

 

 RM'000

RM'000

 RM'000

Segment Diamond

27,300

2,450

14,540

Segment Gold

36,100

3,150

16,490

Segment Silver

6,200

(230)

3,170

Segment Bronze

7,800

(550)

3,800

Additional information:

1. Segments Diamond and Gold earned RM5,600,000 and RM3,800,000, respectively, from sales to other operating segments. The remaining operating segments have no internal sales.

2. The company identifies reportable segments based on revenue.

Required:

a. Describe briefly any two (2) factors to be considered in determining whether or not products and services are related for the purpose of identifying operating business segments.

b. Categorise the four operating segments into reportable and non-reportable segments in accordance to MFRS 8 Operating Segments. Show all workings.

QUESTION 2:

BabyAlike Skin Care Bhd has three operating segments, Cosmetics, Health Foods and Hygiene. The results for each segment and for the head office for the year ended 31 December 2011 are as follows:

 

Cosmetics

RM million

Health foods

RM million

Hygiene

RM million

Head office

RM million

External sales

112.5

125

187.5

-

Inter-segment sales

12.5

32.5

150

-

Segment result (profits)

18

37

147

12

Segment assets

157.5

262.5

325

37.5

Segment liabilities

32.5

57.5

75

7.5

The profit generated by the headquarters is only incidental to the activities of the company as a whole.

During the year 2011, the company received interest income of RM3.75 million and paid interest expense of RM2.5 million. The tax expense for the year was RM50 million.

Required:

With reference to FRS 8, Operating Segments, explain the quantitative threshold tests that BabyAlike Skin Care Bhd may apply to identify the reportable segments for year 2011. Use the information given above to illustrate your answer.

QUESTION 3

Worldwide is a multinational company that has business activities located in three sectors - Europe, North America and Asia.

The company also has a head office that procures all necessary finance for the company's activities. The operating costs for 2012 relating to the head office was RM10,000,000.

The results and other relevant information for the three sectors for the year ended 31 December 2012 are as follows:

 

Revenue

Results

 

RM'000

Total assets

RM'000

Total Liabilities

RM'000

Depreciation

 

RM'000

Capital expenditure

RM'000

 

External

RM'000

Internal

RM'000

Europe

266,000

20,000

60,400

204,060

26,600

90,000

15,000

North America

 

232,750

 

16,000

 

47,100

 

193,320

 

25,200

 

50,000

 

12,000

Asia

166,250

13,000

38,500

139,620

18,200

40,000

14,500

Additional information:

i. Investment income for the year was RM6,000,000 and finance cost was RM25,000,000. These cannot be allocated.
ii. Income tax expense for the year was RM28,000,000.
iii. Other corporate assets amounted to RM56,000,000 and the related depreciation for the year is RM4,000,000.
iv. Other corporate liabilities amounted to RM193,000,000.

Required:

a) Identify the reportable segments. The company uses ‘Revenue' to identify its reportable segments.

b) Prepare a segment report for Worldwide for the year ended 31 December 2012 that complies with FRS 8 Operating Segments.

QUESTION 4

An entity has the following operating segments for the year ended 30 June 2013:

Segment

Revenue

Profit or Loss

Assets

 

Internal

RM'million

External

RM'million

Total

RM'million

 

RM'million

 

RM'million

Garments

2

4.6

6.6

(3.75)

30

Machinery

4

25

29

9

100

Publishing

0.3

0.8

1.1

0.25

40

Office supplies

0.5

3.4

3.9

(2.1)

20

IT software

1.8

9.2

11

6

70

Home furnishing

2.4

13

15.4

7

90

Total

11

56

67

16.4

350

The entity uses 10% revenue test to identify reportable segments.

Required:

a. Apart from the 10% threshold test, MFRS 8 Operating Segments also requires reportable segments to meet the 75% total revenue test. Explain briefly the 75% total revenue test.

b. Based on the above information, prepare a segmental report for the entity for the year ended 30 June 2013.

QUESTION 5

Pan Malaysian Airlines Bhd operates predominantly in two business segments: airline operations and cargo services. Other business segments include catering, engineering, computerized reservation services, trucking and warehousing services, retailing of goods, terminal charges and tour and travel related activities, none of which are of a sufficient size to be reported separately. As at 31 December 2011, you are given the following information:

 

                       

RM'000

Airline operations:

External sales

10,560,906

 

Inter-segment sales

1,088,462

 

Segment results

174,176

 

Segment assets

12,456,096

Cargo services:

External sales

2,356,730

 

Segment results

172,736

 

Segment assets

277,550

Other additional information:

 

RM'000

Finance costs

138,402

Taxation

44,690

Unallocated assets

3,495

Required:

Prepare the segmental report to be disclosed in the notes to the accounts of Pan Malaysian Airlines Bhd as at 31 December 2011 showing all relevant information.

Reference no: EM13976033

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