The CFA Institute has published a report 'Segment Disclosures: Investor Perspectives' in which it surveyed its members regarding their level of satisfaction with existing segment disclosure requirements and solicited their views on areas for improvement.
Current US GAAP and IFRS require that companies report segment information in a manner that is consistent with the way that management organizes the firm internally for making operating decisions and assessing performance. This is referred to as the “management approach” to segment reporting. In brief, companies first determine what constitutes an operating segment, which is defined as a component of a company that earns revenues and incurs expenses, whose operating results are reviewed by the company's chief operating decision maker (CODM), and for which discrete financial information is available. The CODM is the individual who both (1) allocates resources to, and (2) assesses the performance of the segments of a public entity. Discrete financial information generally consists of operating performance information, such as revenue and gross profit by product line; generally, a review of revenue-only data does not meet this requirement.
The survey results show that 75% of investors rate segment disclosures as very important to their analysis, but that only 13.4% are satisfied with the segment disclosures as currently provided. The survey therefore concludes that the implication for standard-setters is that there is substantial work to be done to meet segment disclosure investor needs.
Although the paper is more focused on US GAAP and Topic 280, the paper points at the similarity of the segment reporting requirements between US GAAP and IFRS and notes that a review of IFRS 8 Operating Segments should also be a project for the IASB.
Full press release
© CFA Institute
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