C.1 Scope

Which entities are within the scope of ASU 2023-07?

All public entities that are subject to the segment reporting requirements of ASC 280 (which, as expressly provided in ASU 2023-07, include public entities that have a single reportable segment) are within the scope of ASU 2023-07. Such public entities include those that are preparing for the sale of securities in a public market, such as in an initial public offering.

The scope of ASU 2023-07 also includes the following:

• Entities that only have debt securities trading in a public market and those that have “issued debt or equity securities or [are] conduit bond obligor[s] for conduit debt securities that are traded in a public market.”1
• Broker-dealers under ASC 940 that are considered public business entities.
• Investment companies under ASC 946 that are considered public business entities.

Does ASU 2023-07 remove any of the existing requirements to report segment information under ASC 280?

No. All existing requirements to disclose segment information under ASC 280 are unchanged. The amendments in ASU 2023-07 require disclosure of incremental segment information on an annual and interim basis for entities within the scope of ASC 280. In addition, the amendments in the ASU do not change how a public entity (1) identifies the CODM, (2) identifies and aggregates its operating segments, or (3) applies the quantitative thresholds to determine its reportable segments.

Will an entity otherwise within the scope of ASU 2023-07 that does not yet recognize external or internal revenue (“prerevenue”) be required to comply with the requirements of ASC 280, as amended by the ASU?

Yes. Although such an entity may not currently be profitable or have commercial revenue streams, an entity that engages in business activities will still need to comply with the requirements of ASC 280 to report segment information, including those related to the disclosure of significant segment expenses and other incremental disclosures introduced by ASU 2023-07.

For example, a biotech company in the research and development phase, which has not yet achieved commercialization, might not generate external revenue. This biotech company would still need to comply with ASC 280, including the disclosure requirements of ASU 2023-07.

In a combined filing that includes the financial statements of multiple issuers, does each issuer or entity listed on the front cover of the Form 10-K or Form 10-Q need to consider ASU 2023-07?

Yes. The SEC will typically accept the filing of one periodic report for multiple issuers that meet the criteria in Instruction I to Form 10-K, with separate reporting for each issuer. Each issuer (i.e., each entity listed on the front cover of the filing) would need to (1) apply ASU 2023-07 regardless of whether it has a single reportable segment and (2) include the required segment disclosures.