Identify operating segments before applying thresholds

Granite Harbor's organization chart supplies four labels: Consumer, Clinical, Industrial, and Corporate. The chief executive receives product dashboards, while an executive committee makes capital-allocation decisions from a different monthly package. The reporting analysis begins with those decision paths, not with turning the four printed labels into segments.

Identify the function, then the components

Document who allocates resources and assesses performance, the participants, authority, cadence, decisions, disagreements, and information reviewed. The CODM is a function; a familiar title is only a lead.

Apply that test to Granite Harbor before naming anyone. The executive committee develops and ordinarily executes allocation decisions from its monthly package; the chief executive receives different dashboards and can reverse the committee. Those facts point to the committee process and the chief executive's reserved authority, but they do not yet show who actually assesses performance, how often reversals occur, or which information controls the final decisions. The defensible answer is a focused evidence request, not “CEO” or “committee” from title alone.

Here is a completed micro-example. At fictional Breakwater Labs, the chief executive alone approves product budgets, plant closures, and reallocations. The controller's monthly product package is the information she reviews for those decisions; the finance committee recommends changes but cannot approve them. The memo conclusion is: “For this reporting period, the chief executive performs the CODM function because the controlled minutes and monthly package show her allocating resources and assessing product performance. Reconsider if delegated approval authority or the package changes.” The conclusion names the function, evidence, period, and change condition. It does not infer operating segments from the chief executive's title.

For each candidate component, establish business activities, revenues and expenses, discrete financial information, regular review by the CODM for the specified purposes, and reconciliation to the reporting entity. A legal entity, product, geography, cost center, or dashboard may or may not satisfy the model.

Aggregation is a criterion, not a target

Once operating segments exist, evaluate whether aggregation is permitted under the current criteria. Do not combine components solely because management wants fewer disclosures or because aggregation changes a numerical threshold. Preserve economic characteristics, products and services, production processes, customer types, distribution methods, regulatory environments, and other required evidence.

Apply reportability in order

As verified from the Topic 280 source record on August 7, 2026, an operating segment is separately reportable when it meets any one of three quantitative tests: 10 percent of combined internal and external segment revenue; 10 percent of the greater absolute combined profit of profitable segments or combined loss of loss-making segments; or 10 percent of combined segment assets. After those tests, reportable segments must cover at least 75 percent of consolidated external revenue, with additional segments identified when needed. Recheck the current authoritative text and controlled population for every course offering.

1. Start with the controlled operating-segment population.
2. Apply supported aggregation.
3. Compute the revenue, profit or loss, and asset tests under the specified definitions and signs.
4. Test external-revenue coverage and whether additional segments are needed.
5. Evaluate consistency, changes, comparatives, and other information.
6. Reconcile reportable segments, all other components, corporate items, intersegment activity, and eliminations to consolidated amounts.

A segment below one 10-percent test can qualify under another or remain visible in another category. Thresholds identify reportability after operating segments; they do not determine which components exist.

Evidence challenge

Explain why the same internal monthly report can be evidence for CODM identification, operating-segment identification, segment measures, and significant expenses without answering any one of those questions by itself.