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ACCA Strategic Professional · Strategic Business Reporting (International) · Analysis and interpretation of financial and non-financial information and measurement of performance

Brelko Group has the following operating segments (all figures in $m): A: external revenue 52, inter-segment revenue 8, profit 9; B: external revenue 30, inter-segment 10, profit 4; C: external revenue 12, inter-segment 0, loss (7); D: external revenue 6, inter-segment 0, profit 2. Total segment revenue is 118, total profits of profitable segments are 15, and the loss-making segment's loss is 7. Which segments are reportable solely on the 10% quantitative thresholds?

All four segments are reportable. A, B and C exceed the 10% revenue threshold of 11.8m, and D exceeds the 10% profit threshold of 1.5m, because its profit of 2m is above 10% of 15m, the greater of combined profits and combined losses. Meeting any one test is sufficient.

  1. AA, B and C onlyCorrect
  2. BA and B only
  3. CA, B, C and D
  4. DA only

Explanation

Revenue threshold is 10% of 118 = 11.8: A (60), B (40) and C (12) pass. Profit test uses the greater of profits (15) and losses (7) in absolute terms, so 15, and 10% is 1.5: A (9), B (4), C (7 loss) pass, and D (2) also passes. But the revenue test is met by A, B and C, and D passes the profit test, so D is reportable too. Checking D: profit 2 exceeds 1.5, so D is reportable. Hence all four qualify.

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