Page 256 - F1 Integrated Workbook STUDENT 2018

Chapter 14

Solution

The information can be analysed as follows:

European Asia African Middle East Others Total
$m $m $m $m $m $m
Revenue
Internal 10 20 10 50 10 100
External 100 300 100 500 100 1100
Total 110 320 110 550 110 1200
% to total sales 9.2% 26.7% 9.2% 45.7% 9.2%
Segmental profits 5 60 5 100 10 180
% to total profit 2.8% 33.3% 2.8% 55.6% 5.5%
Segmental assets 150 800 50 1600 600 3200
% to total assets 4.7% 25% 1.7% 50% 18.6%

Explanation:

The only segments that meet the 10% criteria are Asia and Middle East.

It is important to understand a segment does not have to be 10% of all of the
criteria. To be recognised it can 10% of any of the criteria.

However, collectively external revenue is only 66.7% of the total revenue (Asia
= 25% (300/1200) and Middle East = 41.7%(500/1200)).

Therefore, additional segments must also be reported to meet the 75% of
revenue criteria, i.e. European segment as it is the next largest segment.

246