C.3 Entities With a Single Reportable Segment

Would entities managed on a consolidated basis be permitted to disclose a segment’s measure of profit or loss in addition to consolidated net income?

Yes. The SEC staff would continue to expect that the required measure for these entities would be consolidated net income, since ASC 280 requires disclosure of the measure closest to GAAP (i.e., the measure most consistent with how amounts are measured in the financial statements).

As discussed above, an entity may voluntarily disclose additional measures of segment profit or loss. However, such additional measures, if not computed on a basis consistent with GAAP, would be considered non-GAAP performance measures and subject to the requirements discussed in FAQs 6, 8, and 9.

Would entities that aggregate multiple operating segments into a single reportable segment, and therefore do not manage the business on a consolidated basis, be permitted to disclose a segment measure of profit or loss other than consolidated net income?

Yes. The evaluation of whether an entity is managed on a consolidated basis may be necessary in circumstances in which the entity is aggregating multiple operating segments into a single reportable segment. Although our discussions with the SEC staff did not address this, we would not object that it would be reasonable for an entity that aggregates multiple operating segments into a single reportable segment to use a segment performance measure other than consolidated net income. This is because ASC 280-10-50-11 permits, but does not require, an entity to aggregate operating segments into a reportable segment if their economic and qualitative characteristics are similar. In other words, if an entity elected not to aggregate operating segments, it would have multiple operating and reportable segments and could apply the multiple-segment reporting concepts discussed herein.

Would the SEC staff’s views on whether a consolidated GAAP measure, such as net income, is the required segment performance measure to be disclosed under ASC 280 be different if the CODM were not the CEO or CFO who certifies the Form 10-Q or Form 10-K for an entity that has a single reportable segment and is managed on a consolidated basis?

While certification of the Form 10-Q or Form 10-K is one of several data points indicating that the certifying officer receives and reviews information about consolidated net income, it is not determinative. The SEC staff informally indicated that it is unaware of instances in which a CODM has managed an entity with a single reportable segment on a consolidated basis but has not regularly reviewed a consolidated GAAP measure of profit and loss, such as consolidated net income.

Could there be circumstances in which an entity is organized as a single operating segment but is not managed on a consolidated basis?

It depends. ASC 280-10-55-15D (added by ASU 2023-07) explicitly addresses this question. In a manner consistent with that guidance, an entity should first look to ASC 280-10-50-4 to determine whether the entity is managed on a consolidated basis. The analysis under ASC 280-10-50-4 should take into consideration how the entity distinguishes the business activities of the single operating segment from other activities of the entity and whether there is evidence, beyond just the existence and use of a certain measure of profit or loss, that the entity is managed on a consolidated basis. For example, the entity might consider how budgets are prepared, resources are allocated, and performance is assessed.

In the SEC staff’s view, the mere exclusion of a corporate headquarters or a certain functional department from a measure of profit or loss reviewed by the CODM is not determinative of whether an entity is managed on a consolidated basis.

If the significant segment expenses for an entity that has a single reportable segment and is managed on a consolidated basis are at the same level, or use the same category, of expenses as the income statement line items, is the entity required to duplicate the information provided in the consolidated income statement?

No. When the regularly provided significant segment expense information is the same as that included in the consolidated income statement, entities would have a choice of either of the following:

• Disclose those expenses as significant segment expenses in the segment footnote.
• Include a statement indicating that the CODM is regularly provided with only the consolidated expenses as noted on the face of the income statement (rather than disclosing a detailed reconciliation of significant expenses and other expenses as required by ASU 2023-07). This approach is consistent with paragraph BC32 of the ASU, which states, in part, that “[w]hile duplication is not prohibited, the Board believes that duplication of the entire consolidated income statement in the segment footnote is unnecessary; rather, a public entity may choose to reference the primary financial statements in the segment footnote.”

For an entity that has a single reportable segment and is managed on a consolidated basis, would the expenses on the face of the income statement be its significant segment expenses that need to be disclosed in the segment footnote?

It depends on the facts and circumstances. An entity should consider whether more detailed expenses are regularly provided to the CODM and whether these expenses would need to be separately disclosed as significant expenses on the basis of quantitative and qualitative factors. See FAQ 25 for a discussion of circumstances in which the CODM is provided with significant segment expenses in more than one way.