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Segments & Interim Reporting (Interim Reporting (Big Items…
Segments & Interim Reporting
Interim Reporting
Short-term F/S for periods < 1 year
Same accounting principles as annual reporting
Two Views
Discrete View
Not GAAP
Interim period is a separate accounting period
Integral View
Interim period is part of the annual period
GAAP
Big Items
Differences from normal GAAP
Gross Profit Method may be used to estimate COGS and Inventory
Temporary declines in Inventory are not recognized
Discontinued Operations & Unusual/Infrequent Items
Are not prorated
Fully recognized in Interim period as incurred
If occurs in Q3, recognize in Q3
Cumulative Gain and Losses
Report everything as if they occurred in the first quarter
Inventory Valuation
Inventory decline losses are recognized in the interim period
Temporary decline loses however are not recognized
Problem with Interim Reporting
Matching principle gets messed up
Expense incurred in one period may benefit future periods
Segment Reporting
Required by public companies
Segment Significance Test (Must meet 1)
10% or more tests (3)
Revenue
Profit
Assets
75% Test
75% of revenues come externally
i.e. Not much internally generated revenues
Disclosure
if one customer is 10% or more of revenue