What defines the 10% "size" test in identifying reportable operating segments?

The definition of the 10% "size" test for identifying reportable operating segments is centered around the segment's contribution to total revenues. According to the guidance provided in the accounting standards, a segment is considered reportable if it generates at least 10% of the total revenues for the entire entity. This criterion ensures that significant segments contributing to the overall financial performance of the company are reported separately, providing stakeholders with clearer insights into areas of operation that are driving revenue.

By focusing on revenue contribution, this test helps to highlight segments that are large enough to warrant separate performance reporting, thereby enhancing the utility of the financial statements for investors and analysts. This aligns with the emphasis on transparency and detail in financial reporting, allowing for a better understanding of the company’s operational structure and its performance across different areas.