C.5 Other Matters
FAQ 31
Question
What is the starting point for the reconciliation of the reportable segment
disclosures?
Answer
ASC 280-10-50-30 requires a public entity to provide reconciliations for certain
information included in the segment reporting disclosures. Reconciliations related
to segment revenue and the segment measure(s) of profit or loss should start with
the amount attributable to the reportable segments and reconcile to consolidated
income before tax, if the performance measure is a pretax measure, or consolidated
income after tax, if the performance measure is a post-tax measure (see Section 4.5). In this context, the “corporate and
all other” or “all other” category presented under ASC 280-10-50-15 does not
represent a reportable segment and should be excluded from the reportable segment
total (see Section 3.7).
FAQ 32
Question
In the period of adoption of ASU 2023-07, does an entity need to disclose the
prior-period significant segment expenses for each reportable segment?
Answer
Yes. As noted in the transition guidance in ASC 280-10-65-1(b), a public entity is
required to apply the guidance in ASU 2023-07 on enhanced segment disclosures
“retrospectively to all prior periods presented in the financial statements unless
it is impracticable to do so.” ASC 280-10-65-1(b) further provides that if an entity
determines that providing the information is impracticable, the entity “shall
disclose that fact and explain why retrospective application is impracticable.” We
expect circumstances in which a company concludes that it is impracticable to
provide the disclosure to be rare.
FAQ 33
Question
In the period of adoption of ASU 2023-07, how does an entity determine the
significant expenses for the comparative period?
Answer
The transition guidance in ASC 280-10-65-1(b) provides that the significant segment
expense and other segment item amounts that are disclosed in the comparative periods
should “be based on the significant segment expense categories identified and
disclosed in the period of adoption.”
FAQ 34
Question
Do the updates to segment information disclosures from ASU 2023-07 affect the
disclosures in MD&A?
Answer
It depends. When adopting the recently issued ASU 2023-07, registrants will need to
consider which incremental disclosures, if any, need to be incorporated into
MD&A to comply with Regulation S-K, Item 303(b). For instance, since the ASU
requires significant segment expenses and other segment items to be disclosed in the
notes to the financial statements, registrants should consider whether incorporating
a discussion of such items into MD&A is necessary to provide what Regulation
S-K, Item 303(a), describes as “material information relevant to an assessment of
the financial condition and results of operations of the registrant.”
Registrants will also need to consider whether MD&A disclosures include segment
expense disclosure that differs from what is disclosed in the segment footnote. If
such expense information is also regularly provided to the CODM, the segment
expenses may be subject to the significant expense principle analysis for purposes
of disclosure in the segment footnote. Note that ASU 2023-07 does not preclude a
registrant from disclosing significant segment expenses in more than one way (e.g.,
by function and by nature) if multiple sets of segment expense information are
regularly provided to the CODM and are deemed to be significant expenses.
FAQ 35
Question
Are there reporting implications when there is a retrospective change to an entity’s
significant segment expenses?
Answer
It depends. In accordance with ASU 2023-07, if an entity changes (1)
“the segment information that is regularly provided to the [CODM] in a manner that
causes the identification of significant segment expenses to change” or (2) “its
internal reports and the segment expense information that is regularly provided to
the CODM changes in the current period,” such changes should be treated in a manner
that is consistent with the treatment of changes in the composition of the entity’s
reportable segments. For example, if a registrant files a new or amended
registration statement (other than Form S-8), the registrant should consider whether
it is required to recast prior-period significant segment expense if the new or
amended registration statement is filed after the filing of a Form 10-Q that first
reports a change in significant segment expense. See Section 7.5 for reporting implications of
changes in the composition of reportable segments and/or significant segment
expenses related to registration statements, prospectus supplements, and nonpublic
offerings.
When an entity has what ASU 2023-07 describes as “significant changes from prior
periods to the measurement methods of expenses, the method for allocating expenses
to a segment, or changes in the method for allocating centrally incurred expenses,”
we believe, as indicated in the ASU, that “it is preferable [though not required] to
show all segment information on a comparable basis to the extent it is practicable
to do so” in a manner consistent with the existing recasting requirements for
reflecting a change in the measurement of a segment’s profit or loss.