Segment reporting
An operating segment is a component that earns revenues and incurs expenses, whose results are regularly reviewed by the chief operating decision maker (CODM), and for which discrete financial information is available.
The 10% quantitative thresholds
A segment is reportable if it meets any one of:
- Revenue (including intersegment) ≥ 10% of combined revenue
- Absolute profit or loss ≥ 10% of the greater of combined profit of profitable segments or combined loss of losing segments
- Assets ≥ 10% of combined assets
Then apply the 75% test: reportable segments must account for at least 75% of consolidated external revenue; if not, add segments until they do.
EXAMPLE: A company has combined segment assets of $50,000,000. A segment with $6,000,000 of assets (12%) is reportable on the asset test alone, even if its revenue and profit are small.
Interim reporting — the integral view
IMPORTANT: US GAAP treats each interim period as an integral part of the annual period. Costs benefiting the whole year (annual property taxes, planned major maintenance, bonuses) are allocated across interim periods rather than expensed entirely when incurred. Income tax expense uses the estimated annual effective tax rate applied to year-to-date income.
Key SEC filings
| Form | Purpose |
|---|---|
| 10-K | Annual report — audited financial statements |
| 10-Q | Quarterly report — reviewed (not audited) statements |
| 8-K | Current report for material events (auditor change, bankruptcy, major acquisition) |
| S-1 | Registration statement for new securities |
| Schedule 14A | Proxy statement |
EXAM TIP: Filing deadlines depend on filer status — large accelerated filers have the shortest deadlines, non-accelerated filers the longest. A LIFO liquidation expected to be replaced by year-end is not treated as a permanent interim gain; the expected replacement cost is used instead.