Academic journal article Journal of Accountancy

FASB Issues ED on Segment Reporting

Academic journal article Journal of Accountancy

FASB Issues ED on Segment Reporting

Article excerpt

The Financial Accounting Standards Board has published a proposed statement that would change the way public companies report disaggregated information. The exposure draft, Reporting Disaggregated Information about a Business Enterprise, would require companies to report financial information about operating segments in the form that it is used internally for evaluating segment performance and determining resource allocation. The statement would not apply to nonpublic companies or not-for-profit organizations. (The International Accounting Standards Committee has issued its own ED. See "IASC Issues Segment Reporting Exposure Draft," J of A, Mar. 96, page 18.)

Edmund L. Jenkins, partner of Arthur Andersen and chair of the American Institute of CPAs special committee on financial reporting, was enthusiastic about the change, saying financial report users have long argued that better segment information was needed. "Investors make their decisions based on whether they think the rewards outweigh the risks," said Jenkins. "Better segment information would make it easier to assess the risks, resulting in the best allocation of capital."

Jenkins said the FASB proposal would place the same information top management uses in the financial report. "The ED proposes reporting information only to the extent that it is used to manage the business, not the arbitrary allocations that currently are required under FASB Statement no. 14, Financial Reporting for Segments of a Business Enterprise. …

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