Question

The Shaw Navigational Company is a public Canadian corporation that operates a fleet of ships on the Great Lakes. In common with other Great Lakes shipping companies, rates are quoted and revenues are collected in U. S. dollars, regardless of the location or nationality of the shipper. Over 90% of Shaw’s consolidated gross revenues, operating profits, and identifiable capital assets relate to the shipping business, and thus Shaw’s management claims exemption from segmented reporting requirements on the grounds that shipping represents its only operating segment. In 20X3, Shaw’s consolidated net income was $ 1,200,000.
Shaw does have two subsidiaries that are not in the shipping business. One is a bus company that operates on intercity routes in Manitoba, and that is consolidated with the shipping operation. The bus fleet has recently been modernized, and the new buses have been acquired by means of leases rather than by an outright purchase.
The other subsidiary is a casualty insurance company located in Michigan. About 20% of the insurance company’s business involves Great Lakes shipping, although mainly for ship-ping companies other than Shaw. Shaw’s earnings from the insurance company amounted to $ 180,000 in 20X3.

Required
Comment on management’s assertion that Shaw is exempt from segment reporting because it operates in one line of business.



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  • CreatedMarch 13, 2015
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