2.7 Subsidiary Financial Statements
Operating segments should be identified at the reporting-entity level. In some instances, a public entity
may have a consolidated subsidiary that meets the definition of a public entity and is therefore within
the scope of ASC 280. In such cases, the parent entity would apply the guidance in ASC 280 to identify
the operating segments at the consolidated level, and a separate evaluation would be performed for the
subsidiary reporting entity.
ASC 280-10
Example 1: Subsidiary of a Public Entity Has Public Debt and Separate Financial Statements Have Reportable Segments
55-27 Assume that an entity is organized as follows.
55-28
This Example discusses the determination of reportable
segments (see paragraph 280-10-50-10) by a public entity
when one of its subsidiaries is itself a public entity and
includes segment information in its separate financial
statements.
55-29 Subsidiary C is itself a public entity because it has public debt outstanding. The segment information for
the separate financial statements of Subsidiary C discloses three reportable segments (Dept. Y, Dept. Z, and
Division 7).
55-30 In this situation it should not be automatically assumed that the reportable segments of Subsidiary C
are also reportable segments within the consolidated financial statements of Public Company. Determining the
number of operating segments of a public entity depends on the specific facts and circumstances and should
be separately evaluated for each public entity that is required to apply this Subtopic.