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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:

  1. Calculate sales to unaffiliated customers within a country and as a percent of the consolidated sales.

  2. Calculate long-lived assets within a country and as a percentage of the long-lived assets.

  3. 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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