2.4 Discrete Financial Information
Another characteristic of an operating segment is the availability of discrete financial information. While
ASC 280 does not define “discrete financial information,” we believe that it generally involves some
measure of a component’s profitability that can be readily distinguished from that of other components
of the organization. For example, if the information provided to the CODM contains revenue and gross
profit by service line, discrete financial information would be available, and there would generally be
enough information to assess performance and make resource allocation decisions by service line.
However, this measure may not reflect GAAP-based earnings or all costs that
would be necessary for running the component as a stand-alone business. In many instances,
the availability of gross margin for the component will be sufficient to qualify as discrete
financial information. This is consistent with comments made at the AICPA Conference on
Current SEC and PCAOB Developments in 2015 and 2016 by Division staff members, who noted
that the absence of fully allocated costs to a component does not preclude the component
from having discrete financial information.
Further, as discussed in ASC 280-10-55-5, allocation of assets is not necessary
for a component to be considered an operating segment. Thus, discrete financial
information may consist of only limited results of operations information, such as
revenues and gross profit margin, without balance sheet information.
Example 2-8
Company D’s CODM receives information about
revenue for two products, product A and product B,
which are produced by the same operating unit. No
expense information is regularly provided or
available for either product. The CODM does not
have a measure of profit or loss by product, and
therefore it is likely that there would not be
enough information to assess the performance of
the individual products or make resource
allocation decisions. In this case, operating
segment performance would need to be reported at a
level in which discrete financial information is
available and provided to the CODM for use in
making operational decisions.
2.4.1 Revenue Information Provided to the CODM
For some entities, the information provided to and regularly reviewed by the
CODM consists of consolidated operating results and revenue disaggregated in accordance
with ASC 606, by product or service line or by geography, with no expenses shown. As
discussed above, revenue alone will generally not be sufficient for a CODM to assess
performance and allocate resources. However, entities should carefully consider all facts
and circumstances, including why the CODM receives disaggregated revenue, how the CODM
uses such information, and whether revenue alone is sufficient for the CODM to allocate
resources and assess performance.