2.5 Multiple Sets of Data or Components
ASC 280-10
50-6 For many public entities,
the three characteristics of operating segments described in
paragraph 280-10-50-1 clearly identify a single set of
operating segments. However, a public entity may produce
reports in which its business activities are presented in a
variety of different ways. If the chief operating decision
maker uses more than one set of segment information, other
factors may identify a single set of components as
constituting a public entity’s operating segments, including
the nature of the business activities of each component, the
existence of managers responsible for them, and information
presented to the board of directors.
50-9 The characteristics in
paragraphs 280-10-50-1 and 280-10-50-3 may apply to two or
more overlapping sets of components for which managers are
held responsible. That structure is sometimes referred to as
a matrix form of organization. For example, in some public
entities, certain managers are responsible for different
product and service lines worldwide, while other managers
are responsible for specific geographic areas. The chief
operating decision maker regularly reviews the operating
results of both sets of components, and financial
information is available for both. In that situation, the
components based on products and services would constitute
the operating segments.
Given the framework of the management approach under ASC 280, there may be more than one
way to provide discrete financial information to the CODM (e.g., by products and services and also by
geography, which would suggest overlapping sets of components). In those instances, an entity may
need to use additional judgment to identify operating segments and should consider the following:
- The nature of the business activities of each component — For example, if information about products and services and geography is provided, what is the relevance and importance of each type of information to the overall entity? Is primarily one product sold in multiple geographic areas or are multiple products primarily sold in one geographic area?
- The existence of segment managers — Which components have segment managers who are accountable to the CODM?
- What information is presented to the board of directors — Does the board of directors receive one set of information or more than one set? In this regard, paragraph 70 of the Background Information and Basis for Conclusions of FASB Statement 131 observes that in many enterprises, “only one set of data is provided to the board of directors. That set of data generally is indicative of how management views the enterprise’s activities.”
Example 2-9
Company D has four product lines: E, F, G,
and H. Product lines E and F are manufactured in the United
States. Product lines G and H are manufactured in China.
Company D has vice presidents, who are responsible for each
of the product lines, and different sales managers, who are
responsible for each geographic area. The CODM only receives
discrete financial information by product line. In this
case, given the absence of financial information at the
geographic level, all four product lines are likely to be
identified as operating segments.