Segment Reporting
SEGMENT REPORTING Many U.S. companies operate in several different industries or in different geographic area. When this occurs, the difficulties related to financial statement analysis are compounded.
Investors who must evaluate the relative strengths and weaknesses of stock of a diversified company have a difficult task when analyzing such companies which report only the aggregate of their operations. Industry segments and geographic areas of operations can have different levels of risk and opportunities. Strengths and weaknesses of a company are difficult to isolate when only consolidated financial statement are presented and segments exist. For this reason, financial statement analysts prefer to rely upon supplementary information provided in financial statements referred to as segment reporting which provides disaggregated information to assist them in evaluating the company. The need for segment information is the result of many environmental factors, including the growth of conglomerates, acquisitions, diversifications, and foreign activities of enterprises.
Segment information is included (1) within the body of the financial statements, with supporting footnote disclosures, (2) entirely in the footnotes, or (3) in a separate schedule that is considered an integral part of the financial statements.
REPORTABLE SEGMENT SFAS 131, Disclosures about Segments of an Enterprise and
Related Information, defines an operating segment as a component of an enterprise that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same enterprise), whose operating results are regularly reviewed by the enterprise's chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. Examples of a segment of a
Investors who must evaluate the relative strengths and weaknesses of stock of a diversified company have a difficult task when analyzing such companies which report only the aggregate of their operations. Industry segments and geographic areas of operations can have different levels of risk and opportunities. Strengths and weaknesses of a company are difficult to isolate when only consolidated financial statement are presented and segments exist. For this reason, financial statement analysts prefer to rely upon supplementary information provided in financial statements referred to as segment reporting which provides disaggregated information to assist them in evaluating the company. The need for segment information is the result of many environmental factors, including the growth of conglomerates, acquisitions, diversifications, and foreign activities of enterprises.
Segment information is included (1) within the body of the financial statements, with supporting footnote disclosures, (2) entirely in the footnotes, or (3) in a separate schedule that is considered an integral part of the financial statements.
REPORTABLE SEGMENT SFAS 131, Disclosures about Segments of an Enterprise and
Related Information, defines an operating segment as a component of an enterprise that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same enterprise), whose operating results are regularly reviewed by the enterprise's chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. Examples of a segment of a