Identifying reportable segments
An operating segment is reportable if it meets any one of three 10% quantitative thresholds, applied to its absolute value versus the combined total of all operating segments:
- Revenue (including intersegment) is 10% or more of combined revenue
- Absolute value of profit or loss is 10% or more of the greater of combined profit of profitable segments or combined loss of loss segments
- Assets are 10% or more of combined assets
There's also a 75% overall test: reportable segments must together account for at least 75% of total consolidated external revenue; if not, more segments must be added even if individually below the 10% thresholds.
Interim reporting: the "integral view"
US GAAP treats each interim period as an integral part of the annual period, not a discrete standalone period. This means costs that benefit the whole year (e.g., an annual property tax bill, or an inventory loss expected to be recovered by year-end) can be allocated/estimated across interim periods rather than expensed entirely in the period incurred.
IMPORTANT: Income tax expense in interim periods uses an estimated annual effective tax rate, applied to year-to-date income — not a fresh, discrete calculation each quarter.
EXAM TIP: A LIFO liquidation expected to be replaced by year-end is not recognized as a permanent gain at the interim date — the cost of replacement is estimated instead, consistent with the integral view.