Segmental Reporting
Index
1 Introduction to segmental reporting 2
2 Origin of segmental reporting 2
2.1 The fineness-theorem 2
2.2 Market efficiency theory 2
2.3 Agency theory 2
2.4 Accounting theory 3
3 The most important segmental reporting standards 3
3.1 International Accounting Standard 14 (IAS 14) 3
3.1.1 The International Accounting Standards Committee 3
3.1.2 The International Accounting Standards Board 4
3.1.3 IAS 14: Segment reporting 4
3.1.3.1 Objective of IAS 14 (revised) 4
3.1.3.2 Applicability of IAS 14 (revised) 4
3.1.3.3 Identification of segments 5
3.1.3.4 Information that has to be disclosed 5
3.2 SSAP 25 6
4 Comparison with local GAAP 's 6
5 Evaluation of segmental reporting 6
5.1 Advantages 6
5.2 Disadvantages 7
5.2.1 Costs of segmental reporting 7
5.2.1.1 Monetary costs 7
5.2.1.2 Lost time of management 7
5.2.1.3 Decrease in venture sense 7
5.2.2 Difficulties one can experience with the introduction of the reporting requirements 7
5.2.2.1 Difficulties concerning the identification of segments 8
5.2.2.2 Difficulties related to the information to be disclosed 8 Segmental reporting
1 Introduction to segmental reporting
Segmental reporting can be seen as "the analysis of the financial information of an enterprise or group between the different business activities and/or the different geographic areas in which it operates" . The reason for this reporting division into different business activities and geographic areas is that these have different profit potentials, growth opportunities, degrees and type of risk, rates of return and capital needs. Because of these differences, it is possible that consolidated financial statements are not sufficient (these financial statements summarize the results and financial position for the reporting entity as a whole). The disclosure of information about an enterprise 's operation in different industries, its foreign operations and export sales, and its major customers, as an integral part of
1 Introduction to segmental reporting 2
2 Origin of segmental reporting 2
2.1 The fineness-theorem 2
2.2 Market efficiency theory 2
2.3 Agency theory 2
2.4 Accounting theory 3
3 The most important segmental reporting standards 3
3.1 International Accounting Standard 14 (IAS 14) 3
3.1.1 The International Accounting Standards Committee 3
3.1.2 The International Accounting Standards Board 4
3.1.3 IAS 14: Segment reporting 4
3.1.3.1 Objective of IAS 14 (revised) 4
3.1.3.2 Applicability of IAS 14 (revised) 4
3.1.3.3 Identification of segments 5
3.1.3.4 Information that has to be disclosed 5
3.2 SSAP 25 6
4 Comparison with local GAAP 's 6
5 Evaluation of segmental reporting 6
5.1 Advantages 6
5.2 Disadvantages 7
5.2.1 Costs of segmental reporting 7
5.2.1.1 Monetary costs 7
5.2.1.2 Lost time of management 7
5.2.1.3 Decrease in venture sense 7
5.2.2 Difficulties one can experience with the introduction of the reporting requirements 7
5.2.2.1 Difficulties concerning the identification of segments 8
5.2.2.2 Difficulties related to the information to be disclosed 8 Segmental reporting
1 Introduction to segmental reporting
Segmental reporting can be seen as "the analysis of the financial information of an enterprise or group between the different business activities and/or the different geographic areas in which it operates" . The reason for this reporting division into different business activities and geographic areas is that these have different profit potentials, growth opportunities, degrees and type of risk, rates of return and capital needs. Because of these differences, it is possible that consolidated financial statements are not sufficient (these financial statements summarize the results and financial position for the reporting entity as a whole). The disclosure of information about an enterprise 's operation in different industries, its foreign operations and export sales, and its major customers, as an integral part of
References: Emmanuel, C. & N. Garrod (1992). Segment reporting: International issues and evidence. Prentice Hall, ICAEW Fama, E. (1970). Efficient capital markets: A review of theory and empirical work. Journal of finance, Vol. 25, pp. 383-417. Flower J. & G. Ebbers (2004). Global Financial Reporting. Palgrave Basingstoke. Mautz R.K. (1968). Financial Reporting by Diversified Companies. Financial Executives Research Foundation, New York. Radebaugh L.H. & S.J. Gray (1993). International Accounting and Multinational Enterprises. John Wiley & Sons (USA), 3rd edition. Thoen V. & C. Lefebvre (2001). A critical analysis of segmental reporting based on an international perspective: a ground for better regulation. DTEW Research Report 0152, K.U.Leuven, 34 pp.