Purpose of identifying operating business segments

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	Results RM'000	Total assets RM'000	Total Liabilities RM'000	Depreciation RM'000	Capital expenditure 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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