A finished ACC-660 Topic 6 operating segment determination report example, reading segments from the decision maker's reports, rejecting two proposed aggregations and applying every ASC 280 threshold. Searches like "acc 660 topic 6 assignment example", "acc660 topic 6 sample" and "acc-660 topic 6 example" land here.
What a finished ACC-660 Topic 6 operating segment determination report looks like
The report starts from the monthly package the chief executive, the chief operating decision maker, receives: revenue, gross margin and operating profit for five units. Figures are illustrative. Management wants Automotive Refinish, at a 41 percent gross margin, combined with Architectural Paint, at 29 percent and falling, and Marine folded into Industrial Coatings. Under ASC 280 the report finds neither pairing meets the aggregation criteria: margins diverge, customers and channels differ, and marine coatings face their own regulation. The thresholds follow. Industrial at $420 million, Refinish at $260 million and Architectural at $150 million pass the 10 percent revenue test; Marine, at 9 percent of revenue, earns $14 million of the $140 million combined profit, exactly 10 percent. The four reportable segments carry 92 percent of external revenue, clearing the 75 percent test, and Adhesives goes to all other.
How an ACC-660 Topic 6 example is structured
Each conclusion in the report is reached before the next one relies on it. The report opens by identifying the chief operating decision maker and the reports that person reviews, since operating segments come from those reports and not from the draft footnote. The five operating segments are listed second, with the evidence that each has discrete financial information. A third part tests management's two proposed aggregations against every criterion, economic similarity first. The quantitative thresholds follow in a table giving each segment's share of revenue, profit and assets. A fifth part applies the 75 percent test and places Adhesives in all other. The sixth part answers management's stated concern, that four segments would expose a weak unit, and explains why that concern is not a criterion. The report ends with the disclosure consequences of reporting four segments.
The decision maker's package as evidence
Operating segments are read from the monthly reports the chief executive reviews, so the report reproduces that package before examining the presentation management would prefer.
Margins that are not similar
A 41 percent gross margin beside a 29 percent one that is falling fails economic similarity, which ends the Refinish and Architectural pairing before other criteria are weighed.
Marine tested against every criterion
Similar products and processes favor combining Marine with Industrial, but different customers and a separate regulatory regime defeat it, since aggregation requires every criterion together.
A threshold met with no margin
Marine's $14 million of operating profit is exactly 10 percent of the $140 million total, so the report notes how narrowly the unit qualifies and what would change it.
The 75 percent test confirmed
External revenue of the four reportable segments reaches $920 million of $1 billion, so no further segments are needed and Adhesives joins all other.
A weak unit is not a criterion
Management's wish to avoid exposing Architectural's decline is answered directly, because the standard asks how the business is run, not how the result will look.
Where marks go in ACC-660 Topic 6
Reports lose the most credit here by starting from the segments management wants to show. Determining segments from the draft footnote, rather than from what the chief operating decision maker reviews, inverts the management approach the standard is built on. Aggregating on similar products alone, while ignoring margins or customers, treats criteria that must all be met as a menu to choose from. Papers that apply the 10 percent tests to revenue only miss Marine, which qualifies on profit, and the error removes a reportable segment. Running the thresholds before settling aggregation reverses the sequence and can make a unit look too small to report when it should stand alone. A report that never answers management's actual concern leaves the reader with the right number of segments and no argument to take into the meeting.
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ACC-660 Topic 6 questions, answered
Who is the chief operating decision maker?
A function rather than a title: the person or group that allocates resources to the parts of the business and assesses their performance. It is often the chief executive or an executive committee. Identifying it matters because operating segments are defined by the reports that function actually uses, so the example names the chief executive and describes the monthly package that makes the case.
Can a company aggregate segments to keep a weak unit out of view?
Not for that reason. Aggregation is permitted only when segments have similar economic characteristics and are similar in each of the qualitative areas the standard lists, including products, production processes, customers, distribution methods and regulation. A declining unit usually fails the economic test on its own figures. The example treats management's presentation concern as a question to answer, not as a basis for the conclusion.
What do the 10 percent tests measure?
A segment is reportable if its revenue, including sales to other segments, is at least 10 percent of combined segment revenue; if its profit or loss is at least 10 percent of the greater of combined profits of profitable segments or combined losses of loss-making ones; or if its assets are at least 10 percent of combined assets. Meeting any one test is enough, which is how Marine qualifies.