Watson Inc., a multinational company, has operating divisions in France, Mexico, and Japan as well as in the United States. The company reported the following information on its consolidated financial statements for 20X5:
From the consolidated income statement:
Sales revenues ........ $856,000,000
Net income ......... 60,000,000
From the consolidated balance sheet:
Total assets .......... 750,000,000

The following additional information was assembled for Watson’s domestic and international operations for 20X5 (dollars stated in millions):

Additional Information
1. The domestic intracompany sales of $50,000,000 were made to Watson's French division. A total gross profit of $20,000,000 was realized by Watson's domestic operations on these sales. At December 31, 20X5, $10,000,000 of the total gross profit was unrealized from a consolidated viewpoint. At December 31, 20X5, Watson's French division owed domestic operations $15,000,000 related to these sales.
2. The intracompany sales made by Watson's Japanese division were made to Watson's Mexican division. The Japanese division realized a gross profit of $2,000,000 on the sales. At December 31, 20X5, all of the goods sold to the Mexican division remained in its inventory. At December 31, 20X5, the Japanese division had an $8,000,000 receivable related to these sales.

a. Determine whether Watson Inc. must separately report its foreign operations.
b. Determine which of the three individual foreign geographic segments is separately reportable using a 10 percent materiality threshold.
c. Prepare the information about the company's domestic and foreign operations as required by ASC280.

  • CreatedMay 23, 2014
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