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 $ 175,000 $ 600,000 $ 450,000
Intersegment transfers 0 100,000 60,000
Operating expenses 172,000 206,000 190,000
Interest expense 16,000 29,000 19,000
Income taxes 67,000 19,000 34,000
Long-lived assets 91,000 150,000 100,000
The company’s domestic (U. S.) operations reported the following information for the current year:
Sales to unaffiliated customers $ 4,500,000
Intersegment transfers 427,000
Operating expenses 2,410,000
Interest expense 136,000
Income taxes 819,000
Long-lived assets 2,200,000
Taft has adopted the following criteria for determining the materiality of an individual foreign country:
Calculate sales to unaffiliated customers within a country and as a percent of the consolidated sales.
Calculate long-lived assets within a country and as a percentage of the long-lived assets.
Apply Taft’s materiality tests to identify the countries which are 10 percent or more of consolidated sales or consolidated long-lived assets to be reported separately.