4.7 Comprehensive Example — Before Adoption of ASU 2023-07

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4.7 Comprehensive Example — Before Adoption of ASU 2023-07

ASC 280-10-55-46 through 55-50 illustrate the disclosures outlined in ASC 280.

ASC 280-10

Example 3: Illustrative Disclosures

55-46 . . . The following Cases are for a single hypothetical public entity referred to as Diversified Company.

Case A: Disclosure of Descriptive Information About Reportable Segments

55-47 The following is an example of the disclosure of descriptive information about a public entity’s reportable segments. (References to paragraphs in which the relevant requirements appear are given in parentheses.)

Description of the types of products and services from which each reportable segment derives its revenues (see paragraph 280-10-50-21(b)).
Diversified Company has five reportable segments: auto parts, motor vessels, software, electronics, and finance. The auto parts segment produces replacement parts for sale to auto parts retailers. The motor vessels segment produces small motor vessels to serve the offshore oil industry and similar businesses. The software segment produces application software for sale to computer manufacturers and retailers. The electronics segment produces integrated circuits and related products for sale to computer manufacturers. The finance segment is responsible for portions of the company’s financial operations including financing customer purchases of products from other segments and real estate lending operations in several states.
Measurement of segment profit or loss and segment assets (see paragraph 280-10-50-29).
The accounting policies of the segments are the same as those described in the summary of significant accounting policies except that pension expense for each segment is recognized and measured on the basis of cash payments to the pension plan. Diversified Company evaluates performance based on profit or loss from operations before income taxes not including nonrecurring gains and losses and foreign exchange gains and losses.
Diversified Company accounts for intersegment sales and transfers as if the sales or transfers were to third parties, that is, at current market prices.
Factors management used to identify the public entity’s reportable segments (see paragraph 280-10-50-21(a)).
Diversified Company’s reportable segments are strategic business units that offer different products and services. They are managed separately because each business requires different technology and marketing strategies. Most of the businesses were acquired as a unit, and the management at the time of the acquisition was retained.

Case B: Information About Reported Segment Profit or Loss and Segment Assets

55-48 The following table illustrates a suggested format for presenting information about reported segment profit or loss and segment assets (see paragraphs 280-10-50-22 and 280-10-50-25). The same type of information is required for each year for which an income statement is presented. Diversified Company does not allocate income taxes or unusual items to segments. In addition, not all segments have significant noncash items other than depreciation and amortization in reported profit or loss. The amounts in this Example are assumed to be the amounts in reports used by the chief operating decision maker.

Case C: Reconciliations of Reportable Segment Revenues, Profit or Loss, and Assets, to the Consolidated Totals

55-49 The following are examples of reconciliations of reportable segment revenues, profit or loss, and assets to the public entity’s consolidated totals (see paragraph 280-10-50-30(a) through (c)). Reconciliations also are required to be shown for every other significant item of information disclosed (see paragraph 280-10-50-30(d)). For example, if Diversified Company disclosed segment liabilities, they are required to be reconciled to total consolidated liabilities. The public entity’s financial statements are assumed not to include discontinued operations. As discussed in the illustration in paragraph 280-10-55-47, the public entity recognizes and measures pension expense of its segments based on cash payments to the pension plan, and it does not allocate certain items to its segments.

55-50 The reconciling item to adjust expenditures for assets is the amount of expenses incurred for the corporate headquarters building, which is not included in segment information. None of the other adjustments are significant.

Changing Lanes

Comprehensive Example — After Adoption of ASU 2023-07

ASU 2023-07 amends the required disclosures for reportable segments discussed in the FASB’s illustrative example above. See Appendix B for our comprehensive illustration of the disclosures required after the adoption of the ASU.

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.