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]):

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)
Types of products and services from which each reportable segment derives its revenues.

Pending Content (Transition Guidance: ASC 280-10-65-1)

50-21 A public entity shall disclose the following general information (see Example 3, Case A [paragraph 280-10-55-47]):

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)
Types of products and services from which each reportable segment derives its revenues.
The title and position of the individual or the name of the group or committee identified as the chief operating decision maker.

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.

Key Takeaways

In accordance with ASC 280-10-50-21(a), registrants are required to disclose whether operating segments have been aggregated. As discussed in Section 3.2, aggregation of operating segments continues to be a source of SEC comments.

Changing Lanes

ASU 2023-07 introduces significant changes related to disclosures, including requirements for public entities to disclose “[t]he title and position of the individual or the name of the group or committee identified as the chief operating decision maker” (ASC 280-10-50-21(c)) and “[h]ow the [CODM] uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources” (ASC 280-10-50-29(f)). See Chapter 2 for further considerations related to the identification of the CODM.

ASC 280-10-55-47(e) (added by the ASU) provides the following example of a disclosure identifying the CODM:

55-47(e) The title and position of the individual or the group identified as the chief operating decision maker (see paragraph 280-10-50-21(c)).

Diversified Company’s chief operating decision maker is the chief executive officer.

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 7.4 for additional discussion of non-GAAP measures.

4.2.1.1 Changes Introduced by ASU 2023-07

ASC 280-10

50-20 A public entity shall disclose all of the following for each period for which an income statement is presented. However, reconciliations of balance sheet amounts for reportable segments to consolidated balance sheet amounts are required only for each year for which a balance sheet is presented. Previously reported information for prior periods shall be restated as described in paragraphs 280-10-50-34 through 50-35.

Pending Content (Transition Guidance: ASC 280-10-65-1)

50-20 All public entities, including those public entities that have a single reportable segment, shall disclose all of the following for each period for which an income statement is presented. However, reconciliations of balance sheet amounts for reportable segments to consolidated balance sheet amounts are required only for each year for which a balance sheet is presented. Previously reported information for prior periods shall be recast as described in paragraphs 280-10-50-34 through 50-35. (See paragraphs 280-10-55-15D through 55-15F for additional guidance for public entities that have a single reportable segment.)

ASC 280-10

Pending Content (Transition Guidance: ASC 280-10-65-1)

55-15D All public entities, including those public entities that have a single reportable segment, are subject to the requirements of this Topic in its entirety. Paragraph 280-10-50-1(b) states that a characteristic of an operating segment is that it is a component of an entity whose operating results are regularly reviewed by the public entity’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance. Paragraph 280-10-50-4 states that not every part of a public entity is necessarily an operating segment or part of an operating segment; for example, corporate headquarters or certain functional departments may not be part of an operating segment. The entity should evaluate the guidance in paragraph 280-10-50-4 and the definition of an operating segment when identifying its operating segment (or segments) and determining whether that operating segment (or segments) constitutes all or part of the consolidated entity. For example, when a public entity has a single operating segment that constitutes part, but not all, of the consolidated entity, the chief operating decision maker may regularly review the operating results and performance of the operating segment differently than how management assesses the performance of the consolidated entity. Alternatively, when the single operating segment constitutes all of the consolidated entity, the chief operating decision maker may regularly review the entity-wide operating results and performance.

55-15E A public entity that discloses a single reportable segment should identify the measure or measures (in accordance with paragraph 280-10-50-28A) of a segment’s profit or loss that the chief operating decision maker uses in assessing segment performance and deciding how to allocate resources, which may include a profit or loss measure that is not presented on the public entity’s consolidated income statement. For example, the chief operating decision maker of a single reportable segment entity may use both net income and earnings before interest, taxes, depreciation, and amortization as the measures of profit or loss for purposes of assessing segment performance and deciding how to allocate resources. However, earnings before interest, taxes, depreciation, and amortization is not presented on the public entity’s consolidated income statement.

55-15F When the chief operating decision maker of a single reportable segment entity uses more than one measure of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources, at least one of the reported segment profit or loss measures should be that which management believes is determined in accordance with the measurement principles most consistent with those used in measuring the corresponding amounts in a public entity’s consolidated financial statements and reconciled in accordance with paragraphs 280-10-50-30(b) and 280-10-50-32(f). A single reportable segment entity also may report additional performance measures that are used by the chief operating decision maker in assessing segment performance and deciding how to allocate resources in accordance with paragraphs 280-10-50-28A through 50-28B.

4.2.1.1.1 Single Reportable Segment With One Performance Measure

After the adoption of ASU 2023-07, a public entity that has a single reportable segment should provide all disclosures required by the ASU (e.g., significant segment expenses and other segment items) as well as those required by the existing segment guidance in ASC 280. This means that entities with a single reportable segment would need to provide all the segment disclosures that are required for multiple segment entities. Segment asset disclosure is only required if such information is provided to the CODM at a different asset level or category than the amounts disclosed in the consolidated balance sheet; alternatively, the entity may provide a statement indicating that the CODM does not review segment assets at a different asset level or category.

At the 2023 AICPA & CIMA Conference on Current SEC and PCAOB Developments, SEC Associate Chief Accountant Carlton Tartar indicated that when an entity with a single reportable segment is managed on a consolidated basis, the entity would be expected to conclude that consolidated net income is the measure of segment profit or loss that is most consistent with U.S. GAAP.

We encourage entities to consider discussing with auditors, SEC counsel, or the SEC staff how the staff’s view should be applied in cases in which an entity has a single reportable segment and management concludes that it does not manage the entity on a consolidated basis and may therefore use a measure of segment profit or loss that is not consistent with U.S. GAAP.

Entities with single reportable segments will need to review the information that is regularly provided to the CODM to determine which expenses would need to be separately disclosed and reconciled to consolidated net income as the measure of segment profit or loss. In other words, if the significant expenses are at a different level or category of expense as compared with the consolidated income statement line items, entities will have to separately disclose these significant segment expenses. We believe that if the regularly provided segment expense detail is the same as that included in the consolidated income statement, entities would have a choice of either of the following:

Disclose those expenses as significant segment expenses in the segment footnote.
Include a statement indicating that the CODM is regularly provided with only the consolidated expenses as noted on the face of the income statement (rather than disclosing a detailed reconciliation of significant expenses and other expenses as required by the ASU).

Example 4-1

Company L is a pre-revenue life sciences company and has one operating and reportable segment. The consolidated statement of operations includes research and development expenses, general and administrative costs, interest expense, and income taxes; it does not include any revenue. In addition to reviewing the expenses in the consolidated statement of operations, the CODM is regularly provided with research and development costs for programs A, B, and C, which L has concluded are significant. After adopting ASU 2023-07, L would need to include (1) all the required ASC 280 disclosures and (2) significant expense details of the research and development costs for programs A, B, and C and all the other expenses disclosed in the statement of operations, which together reconcile to the consolidated GAAP measure of net income.

4.2.1.1.2 Single Reportable Segment With Multiple Performance Measures

Upon the adoption of ASU 2023-07, a public entity is allowed, but not required, to disclose more than one measure of segment profit or loss even for a single reportable segment, provided that at least one of the reported measures is the segment profit or loss measure that is most consistent with GAAP measurement principles (the required measure). Therefore, entities that have a single reportable segment and are managed on a consolidated basis may present additional measures of segment profit loss, provided that at least of one the measures is consolidated net income.

In addition to the requirement to reconcile each reported measure to the consolidated financial statements, the requirement to provide significant segment expenses and other segment items would also apply to each of these additional reported measures. A public entity that reports an additional measure for a reportable segment in the current period should disclose this additional measure in the prior comparative periods if it was provided to the CODM in those prior periods. Further, as indicated in ASC 280-10-50-28B (added by ASU 2023-07), “a public entity is not precluded from reporting the additional measure or measures for the prior periods in which the measure or measures were not provided to the [CODM].”

For additional guidance regarding the disclosure of multiple measures of segment profit or loss, see Section 4.4.2.

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This publication provides comprehensive guidance; however, it does not address all possible fact patterns, and the guidance is subject to change. Consult a Deloitte & Touche LLP professional regarding your specific issues and questions.