Question

Presented below is an excerpt from the financial statements of H. J. Heinz Company.

Segment and Geographic Data The company is engaged principally in one line of business—processed food products—which represents over 90% of consolidated sales. Information about the business of the company by geographic area is presented in the table below There were no material amounts of sales or transfers between geographic areas or between affiliates, and no material amounts of United States export sales.
Foreign
(In thousands of U.S. dollars)	Domestic	United Kingdom	Canada	Western Europe	Other	Total	Worldwide
Sales	\(2,381,054	\)547,527	\(216,726	\)383,784	\(209,354	\)1,357,391	$3,738,445
Operating income	246,780	61,282	34,146	29,146	25,111	146,685	396,465
Identifiable assets	1362,152	265,218	112,620	294,732	143,971	816,541	2,178,693
Capital expenditures	72,712	12,262	13,790	8,253	4,368	38,673	111,385
Depreciation expense	42,279	8,364	3,592	6,355	3,606	21,917	64,196

Instructions

(c) Why are sales by geographical area important to disclose?

Short answer

Due to the political and economic instability of many countries, sales in these regions should be carefully disclosed.

Step-by-step solution

Meaning of Segment Reporting

The reporting of financial statements of a company's segments or divisions separately is called segment reporting. Publicly traded companies must provide segment data, while privately-owned companies are not obligated to do so.

Explaining the reason for sales by geographical area is important to disclose

Reporting sales by geographical area is extremely important. Many countries are politically and economically unstable, so sales in these regions should be carefully considered. On the other hand, sales to countries that appear to be politically and economically stable indicate that sales in these regions will continue at a higher rate.