4.2 General Information
ASC 280-10
50-21 A public entity shall
disclose the following general information (see Example 3,
Case A [paragraph 280-10-55-47]):
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Factors used to identify the public entity’s reportable segments, including the basis of organization (for example, whether management has chosen to organize the public entity around differences in products and services, geographic areas, regulatory environments, or a combination of factors and whether operating segments have been aggregated)
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Types of products and services from which each reportable segment derives its revenues.
An entity must disclose the factors used in the identification of reportable segments as well as the types
of products and services from which each reportable segment derives its revenue. Its disclosures should
include how management has chosen to organize its business (i.e., by product or service or geography)
and whether operating segments have been aggregated. Disclosure about the basis of organization is an
important aspect of the management approach to segment reporting because it provides insights into
how management has organized the business.
4.2.1 Reporting Considerations for Entities With a Single Reportable Segment
An entity should disclose a single reportable segment if it is (1) organized as a single operating segment
or (2) organized as more than one operating segment and (a) elects to aggregate into a single operating
segment and (b) meets the criteria for such aggregation (see Section 3.2 for a discussion of aggregation).
The SEC staff continues to stress the importance of the disclosure requirement related to the entity’s
basis of organization, particularly when an entity is organized as a single operating segment. At the 2015
AICPA Conference on Current SEC and PCAOB Developments, staff from the SEC’s OCA observed the
following:
At times, application of the guidance will result in identification of a single operating segment. When
such identification is consistent with the guidance, it can be a significant signal to investors about how
management has allocated resources. Upon arriving at this conclusion, registrants should disclose that
they allocate resources and assess financial performance on a consolidated basis and should explain the
basis for that management approach. It would seem counter to the objectives of segment reporting if the
business description indicates the entity is diversified across businesses or products, yet is not managed in a
disaggregated way. [Footnote omitted]
An entity with more than one reportable segment is required to disclose, for each reportable segment, the measure of profit or loss used by the CODM to assess performance and allocate resources. See Section 4.3 for additional discussion of segment disclosures.
In some cases, entities with only one reportable segment have disclosed in the
notes to their financial statements financial information for which the
measurement basis differs from that used in their consolidated financial
statements. The SEC staff has challenged such disclosures as being inconsistent
with the objective of ASC 280, even if the measures were reviewed by the CODM or
the entity's disclosure is argued to be beneficial to readers (e.g., EBITDA for
the entity as a whole or for portions of the entity). Further, as noted by the
staff at the 2016 AICPA Conference on Current SEC and PCAOB Developments, the
presentation of such measures outside of the financial statements (e.g., in
MD&A) would be within the scope of the SEC’s guidance on non-GAAP measures
since the disclosure is not required by U.S. GAAP. See Section 6.4 for
additional discussion of non-GAAP measures.