1.7 ICFR Considerations
Entities need to have effective ICFR to support the judgments they use in
applying the segment guidance and to monitor for changes in the management approach or
changes to other facts and circumstances that might result in different segment
reporting. In prepared remarks, staff from the SEC OCA reminded
registrants and auditors of the importance of effective internal controls related to
segment disclosures by observing the following at the 2015 AICPA Conference on Current
SEC and PCAOB Developments:
The guidance on segment reporting
requires the application of reasonable judgment. Effective [ICFR] supports those
judgments, including the judgments needed in the determination of operating
segments, aggregation, and entity-wide disclosures. Input from, and interaction
with, the [chief operating decision maker (CODM)] may be an important element in the
design of effective ICFR in regard to how the CODM allocates resources and assesses
performance. In addition, documenting the design and effective operation of
management’s controls over these judgments is an integral part of management’s
support for the effectiveness of its ICFR, and will be essential to the auditor’s
ability to evaluate these controls. [Footnote omitted]