Question
Taft Corporation operates primarily in the United States. However, a few years ago, it opened a plant in Spain to produce merchandise to sell there.
Taft Corporation operates primarily in the United States. However, a few years ago, it opened a plant in Spain to produce merchandise to sell there. This foreign operation has been so successful that during the past 24 months the company started a manufacturing plant in Italy and another in Greece. Financial information for each of these facilities follows:
Spain | Italy | Greece | |||||||||
Sales | $ | 230,000 | $ | 655,000 | $ | 505,000 | |||||
Intersegment transfers | 0 | 101,100 | 115,000 | ||||||||
Operating expenses | 227,000 | 261,000 | 245,000 | ||||||||
Interest expense | 38,000 | 51,000 | 41,000 | ||||||||
Income taxes | 89,000 | 41,000 | 56,000 | ||||||||
Long-lived assets | 147,000 | 205,000 | 155,000 | ||||||||
The companys domestic (U.S.) operations reported the following information for the current year:
Sales to unaffiliated customers | $ | 4,720,000 | |
Intersegment transfers | 537,000 | ||
Operating expenses | 2,520,000 | ||
Interest expense | 191,000 | ||
Income taxes | 929,000 | ||
Long-lived assets | 2,310,000 | ||
Taft has adopted the following criteria for determining the materiality of an individual foreign country:
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Calculate sales to unaffiliated customers within a country and as a percent of the consolidated sales.
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Calculate long-lived assets within a country and as a percentage of the long-lived assets.
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Apply Tafts materiality tests to identify the countries which are 10 percent or more of consolidated sales or consolidated long-lived assets to be reported separately.
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