4.3 Information About Profit or Loss and Assets for Each Reportable Segment

ASC 280-10

50-22 A public entity shall report a measure of profit or loss and total assets for each reportable segment. A public entity also shall disclose all of the following about each reportable segment if the specified amounts are included in the measure of segment profit or loss reviewed by the chief operating decision maker or are otherwise regularly provided to the chief operating decision maker, even if not included in that measure of segment profit or loss (see Example 3, Case B [paragraph 280-10-55-48]):

Revenues from external customers
Revenues from transactions with other operating segments of the same public entity
Interest revenue
Interest expense
Depreciation, depletion, and amortization expense
Unusual items as described in paragraph 220-20-45-1
Equity in the net income of investees accounted for by the equity method
Income tax expense or benefit
Subparagraph superseded by Accounting Standards Update No. 2015-01.
Significant noncash items other than depreciation, depletion, and amortization expense.

A public entity shall report interest revenue separately from interest expense for each reportable segment unless a majority of the segment’s revenues are from interest and the chief operating decision maker relies primarily on net interest revenue to assess the performance of the segment and make decisions about resources to be allocated to the segment. In that situation, a public entity may report that segment’s interest revenue net of its interest expense and disclose that it has done so.

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

Revenues from external customers
Revenues from transactions with other operating segments of the same public entity
Interest revenue
Interest expense
Depreciation, depletion, and amortization expense
Unusual items as described in paragraph 220-20-45-1
Equity in the net income of investees accounted for by the equity method
Income tax expense or benefit
Subparagraph superseded by Accounting Standards Update No. 2015-01.
Significant noncash items other than depreciation, depletion, and amortization expense.

50-23 Disclosure of interest revenue and interest expense included in reported segment profit or loss is intended to provide information about the financing activities of a segment.

50-24 If a segment is primarily a financial operation, interest revenue probably constitutes most of segment revenues and interest expense will constitute most of the difference between reported segment revenues and reported segment profit or loss. If the segment has no financial operations or only immaterial financial operations, no information about interest is required.

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

An entity must present a measure of profit or loss for each reportable segment. This measure may vary by reportable segment. See Section 4.4 for further discussion of the measurement of segment disclosures.

Further, ASC 280-10-50-22 outlines additional amounts that should be disclosed if such amounts are either of the following:

“[I]ncluded in the measure of segment profit or loss reviewed by the [CODM].”
“[O]therwise regularly provided to the [CODM], even if not included in that measure of segment profit or loss.”

An entity should therefore carefully consider what kind of information is regularly provided to the CODM. ASC 280-10-55-15 states, in part:

[T]he segment profit or loss amounts listed in paragraph 280-10-50-22 are required if they are included in the measure of segment profit or loss that is used by the chief operating decision maker or if they are otherwise regularly provided to the chief operating decision maker, even if not included in that measure. Disclosure of those amounts is required even though they may not be included in the measure of segment profit or loss or in the determination of segment assets, as applicable, that is reviewed by the chief operating decision maker.

Example 4-2

Company A has identified two reportable segments: retail operations and wholesale operations. The measure of profitability used by the CODM is EBITDA. In reviewing the monthly reporting package, the CODM receives information about revenue from external customers and EBITDA by reportable segment. The CODM also receives a schedule of intersegment revenue by reportable segment as well as summaries of depreciation and amortization expense related to each segment. As a result, A would disclose revenue from external customers, intersegment revenue, depreciation and amortization, and EBITDA by reportable segment. Since the other items listed in ASC 280-10-50-22 are not included in the EBITDA profitability measure or otherwise regularly provided to the CODM, A would not be required to disclose them for each reportable segment.

Revenue from external customers should be reported in accordance with the recognition and measurement principles that are consistent with those used in the measurement of the corresponding amounts in the public entity’s consolidated financial statements.

At the 2023 AICPA & CIMA Conference on Current SEC and PCAOB Developments, Deputy Chief Accountant Melissa Rocha provided additional insight into the SEC staff’s views on the required disclosures for reportable segments under ASC 280-10-50-22, noting that such amounts should not deviate from the recognition and measurement principles in U.S. GAAP. For example, she observed that the SEC staff will object to issuers’ disclosures under ASC 280-10-50-22 of amounts they describe as “segment revenues” when such amounts are based on measurement and recognition principles that are inconsistent with U.S. GAAP.

4.3.1 Interest Revenue and Interest Expense

Generally, interest revenue should be reported separately from interest expense. The disclosure requirements are intended to elicit some information about the reportable segment’s financing activities. However, under an exception in ASC 280-10-50-22, net interest revenue may be disclosed when “a majority of the segment’s revenues are from interest and the chief operating decision maker relies primarily on net interest revenue to assess the performance of the segment and make decisions about resources to be allocated to the segment.” In such instances, the entity should also disclose that interest revenue is presented net of interest expense. Paragraph 95 of the Background Information and Basis for Conclusions of FASB Statement 131 further clarifies, stating, in part:

The Board decided that segments that derive a majority of revenue from interest should be permitted to disclose net interest revenue instead of gross interest revenue and gross interest expense if management finds that amount to be more relevant in managing the segment. Information about interest is most important if a single segment comprises a mix of financial and nonfinancial operations. If a segment is primarily a financial operation, interest revenue probably constitutes most of segment revenues and interest expense will constitute most of the difference between reported segment revenues and reported segment profit or loss. If the segment has no financial operations or only immaterial financial operations, no information about interest is required.

In addition, an entity should consider interest expense and interest income on intersegment transactions. ASC 280-10-55-11 states, in part:

For internal reporting purposes, if interest expense is charged to a segment on advances from another segment and the interest is included in the measure of performance, the amounts of interest expense and interest income shall include the amounts charged internally between the segments.

Changing Lanes

Upon adoption of ASU 2023-07, ASC 280-10-50-22 (as amended by the ASU) requires a public entity to “separately disclose interest expense if it is a significant segment expense in accordance with paragraph 280-10-50-26A.” Therefore, an entity that adopts the ASU should provide gross interest expense (i.e., separate from interest income) if it is a significant segment expense in accordance with ASC 280-10-50-26A, even if the entity discloses interest expense as part of net interest income in accordance with ASC 280-10-50-22. See Section 6.2 for further considerations regarding the significant expense principle. As described in paragraph BC76 of the Background Information and Basis for Conclusions of ASU 2023-07:

The Board also observed that the easily computable guidance requires that an entity disclose interest expense in cases in which a CODM is regularly provided with information about interest revenue and net interest margin. The Board concluded that this outcome will result in equivalent application of the significant expense principle between financial segments and nonfinancial segments.

4.3.2 Specific Asset Information for Each Reportable Segment

ASC 280-10

50-25 A public entity shall disclose both of the following about each reportable segment if the specified amounts are included in the determination of segment assets reviewed by the chief operating decision maker or are otherwise regularly provided to the chief operating decision maker, even if not included in the determination of segment assets:

The amount of investment in equity method investees
Total expenditures for additions to long-lived assets other than any of the following (see Example 3, Case B [paragraph 280-10-55-48]):
1. Financial instruments
2. Long-term customer relationships of a financial institution
3. Mortgage and other servicing rights
4. Deferred policy acquisition costs
5. Deferred tax assets.

50-26 If no asset information is provided for a reportable segment, that fact and the reason therefore shall be disclosed.

In some situations, the CODM receives no asset information by reportable segment or receives asset information unrelated to the items listed in ASC 280-10-50-25. The disclosure requirements for the specific asset information listed in ASC 280-10-50-25 are applicable only when the specified amounts are included in the segment assets reviewed by the CODM or the CODM receives such information. See Appendix B for our comprehensive example of a disclosure of information about reported segment profit or loss and segment assets.

Confidential and Proprietary — for Use Solely by Authorized Personnel

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.