Evidence On The Benefits Of Segment Reporting
CIA_C19.qxd
10/03/2008
19
CONTENTS
OBJECTIVES
16:49
Page 427
Segment reporting
Clare B. Roberts1
19.1 What is segment reporting?
19.2 The need for segment information
19.3 Disclosure regulations
19.3.1 Introduction
19.3.2 Requirements in the United States
19.3.3 IAS 14
19.3.4 IFRS 8
19.4 Evidence on the benefits of segment reporting
19.4.1 Introduction
19.4.2 Studies of user decision making
19.4.3 Studies using researchers’ forecasts
19.4.4 Stock market reactions to segment disclosures
Summary
References
Questions
After reading this chapter, you should be able to: l explain the nature and purposes of segment reporting;
l
outline the development of segment reporting from the 1960s onwards;
l
describe the segment disclosure requirements of the IASB and the United States;
l
outline the major practical problems met when trying to identify segments or trying to write rules on this subject; and
l
explain the contributions of research to the understanding of the benefits and costs of segment reporting.
19.1 What is segment reporting?
It has long been recognized that users of financial statements need consolidated information. However, consolidated statements do not provide all the information needed, and the annual report of any large company will typically include much
1
This is a revised version of the chapter in previous editions by Clare Roberts and Sidney Gray.
427
..
CIA_C19.qxd
10/03/2008
Part V
16:49
Page 428
Major issues in the financial reporting of MNEs
Table 19.1 Caterpillar’s geographical disclosures
External Sales & Revenues
Net property, plant and equipment Information about geographic areas:
2006
2005
2004
2006
December 31,
2005
2004
Inside United States..............................
Outside United States...........................
$19,636
21,881
$17,348
18,991
$14,198
16,108
$5,424
3,427
$4,725
3,263
$4,424
3,258
Total.....................................................
$41,517
$36,339
$30,306
$8,851
10/03/2008
19
CONTENTS
OBJECTIVES
16:49
Page 427
Segment reporting
Clare B. Roberts1
19.1 What is segment reporting?
19.2 The need for segment information
19.3 Disclosure regulations
19.3.1 Introduction
19.3.2 Requirements in the United States
19.3.3 IAS 14
19.3.4 IFRS 8
19.4 Evidence on the benefits of segment reporting
19.4.1 Introduction
19.4.2 Studies of user decision making
19.4.3 Studies using researchers’ forecasts
19.4.4 Stock market reactions to segment disclosures
Summary
References
Questions
After reading this chapter, you should be able to: l explain the nature and purposes of segment reporting;
l
outline the development of segment reporting from the 1960s onwards;
l
describe the segment disclosure requirements of the IASB and the United States;
l
outline the major practical problems met when trying to identify segments or trying to write rules on this subject; and
l
explain the contributions of research to the understanding of the benefits and costs of segment reporting.
19.1 What is segment reporting?
It has long been recognized that users of financial statements need consolidated information. However, consolidated statements do not provide all the information needed, and the annual report of any large company will typically include much
1
This is a revised version of the chapter in previous editions by Clare Roberts and Sidney Gray.
427
..
CIA_C19.qxd
10/03/2008
Part V
16:49
Page 428
Major issues in the financial reporting of MNEs
Table 19.1 Caterpillar’s geographical disclosures
External Sales & Revenues
Net property, plant and equipment Information about geographic areas:
2006
2005
2004
2006
December 31,
2005
2004
Inside United States..............................
Outside United States...........................
$19,636
21,881
$17,348
18,991
$14,198
16,108
$5,424
3,427
$4,725
3,263
$4,424
3,258
Total.....................................................
$41,517
$36,339
$30,306
$8,851