You are the Management Accountant of Global plc. Global plc has operations in a number of different areas of the world and presents segmental information on a geographical basis in accordance with SSAP 25 Segmental reporting. The segmental information for the year ended 30 June 2002 is given below:

Your Managing Director has reviewed the segmental information above and has expressed concerns about the performance of Global plc. He is particularly concerned about the fact that the Africa segment has been making losses ever since the initial investment in 2000. He wonders whether operations in Africa should be discontinued, given the consistently poor results.
Required Prepare a report for the Managing Director of Global plc that analyses the performance of the three geographical segments of the business, based on the data that has been provided. The report can take any form you wish, but you should specifically refer to any reservations you may have regarding the use of the segmental data for analysis purposes.
CIMA, Financial Reporting – UK Accounting Standards, November 2002 (20 marks)

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Europe America Africa Group 2002 2001 2002 2001 2002 2001 2002 2001 Em Em m m m Em Em m TURNOVER Turnover by destination: Sales to third parties 700 680 600 550 400 200 1700 1430 Turnover by origin: Total sales 720 685 610 560 440 205 1770 1450 Inter-segment sales (20) (5) (10) (10) (40) (5) (70) (20) Sales to third parties 700 680 600 550 400 200 1700 1430 PROFIT BEFORE TAXATION Segment profit 1 (loss) Common costs Operating profit 2|| 70 69 990 90 (20) (40) 140 119 (25) (20) 115 99 (18) (15) 97 84 10 all 12 || SI 22 14 119 98. Net interest Group share of associates' profit before taxation Group profit before taxation || NET ASSETS Segment net assets 350 320 360 330 200 180 910 830 Unallocated assets 120 100 1030 930 Group share of net assets of associates Total net assets 55 52 36 30 91 82 1121 1012