4.9 Restatement of Segment Data Because of Change in Reportable Segments
ASC 280-10
50-34 If a public entity changes the structure of its internal organization in a manner that causes the
composition of its reportable segments to change, the corresponding information for earlier periods, including
interim periods, shall be restated unless it is impracticable to do so. Accordingly, a public entity shall restate
those individual items of disclosure that it can practicably restate but need not restate those individual items,
if any, that it cannot practicably restate. Following a change in the composition of its reportable segments, a
public entity shall disclose whether it has restated the corresponding items of segment information for earlier
periods.
50-34A For example, a fundamental reorganization of an entity may cause it to be very difficult and expensive
to restate segment information and therefore it may not be practicable.
Unless restatement is impracticable, an entity must restate prior-period segment data when there has
been a change in the composition of the entity’s reportable segments. Such a change could result from
a revamping of the internal management structure that leads to the identification of new or different
operating segments, as discussed in Section 2.10. Restatement of prior segment data would also be
required when an operating segment is identified as a new reportable segment in the current period on
the basis of quantitative thresholds, as discussed in Chapter 3.
Paragraph 100 of the Background Information and Basis for Conclusions of FASB Statement 131 observes, in part:
The Board decided to require restatement of previously reported segment information following a change in
the composition of an enterprise’s segments unless it is impracticable to do so. Changes in the composition of
segments interrupt trends, and trend analysis is important to users of financial statements.
The information in the segment footnote should be presented consistently for all
periods. Therefore, unless restatement is
impracticable, prior-period segment data presented
for comparative purposes for an operating segment
that is identified as a reportable segment in the
current period should be restated to reflect the
newly reportable segment as a separate segment.
See the next section for further discussion of the
impracticability exception.
Also see Section 6.5 for additional information on implications of retrospective changes in reportable
segments.
4.9.1 Disclosure When Restatement of Earlier Periods Is Impracticable
ASC 280-10
50-35 If a public entity has changed the structure of its internal organization in a manner that causes the
composition of its reportable segments to change and if segment information for earlier periods, including
interim periods, is not restated to reflect the change, the public entity shall disclose in the year in which the
change occurs segment information for the current period under both the old basis and the new basis of
segmentation unless it is impracticable to do so.
If restatement of earlier-period segment information is impracticable, an entity must provide current-period
segment information under both the old basis and new basis of segmentation for the year in
which the change occurs. Such information would not be required if it is impracticable to provide it.
However, an entity that determines that it would be impracticable to present the segment information
under both the old basis and new basis should be prepared to demonstrate and support that
conclusion with adequate documentation.
Situations in which it is impracticable to restate earlier-period operating segment disclosures are
expected to be unusual.
4.9.2 Change in Measure of Segment Profit or Loss
ASC 280-10
50-36 Although restatement is
not required to reflect a change in measurement of
segment profit and loss, it is preferable to show all
segment information on a comparable basis to the extent
it is practicable to do so. If prior years’ information
is not restated, paragraph 280-10-50-29(d) nonetheless
requires disclosure of the nature of any changes from
prior periods in the measurement methods used to
determine reported segment profit or loss and the
effect, if any, of those changes on the measure of
segment profit or loss.
4.9.3 Restatement of Prior Periods Because of the Disposal of Part of an Operating Segment
ASC 280-10
55-7 If a reportable segment
meets the conditions in paragraphs 205-20-45-1A through
45-1G to be reported in discontinued operations, an
entity is not required to also disclose the information
required by this Subtopic. Paragraph 280-10-55-19
addresses whether there is a need to restate previously
reported information if there is a disposal of a
component that was previously disclosed as a reportable
segment.
55-19 Segment information for
prior periods for disposal of a component that was
previously disclosed as a reportable segment is not
required to be restated. However, if the income
statement and balance sheet information for the
discontinued component have been reclassified in
comparative financial statements, the segment
information for the discontinued component need not be
provided for those years. Paragraph 280-10-55-7
addresses disclosure requirements if a component of a
public entity that is reported as a discontinued
operation is a reportable segment.
ASC 205-20 provides guidance for determining whether a disposal group should be presented as
a discontinued operation in the income statement. A discontinued operation may be a reportable
segment, an operating segment, or a component of an operating segment.
ASC 280-10-55-7 notes that when the discontinued operation is a reportable
segment, an entity is not required to separately disclose information for the
discontinued operation within the segment footnote. However, if the discontinued
operation is only a component of a reportable segment, the entity should not
include the discontinued operation in the disclosures for the reportable segment
but should restate prior periods, beginning in the period in which the component
is presented as a discontinued operation.
We believe that the failure of a disposal to meet the criterion to be presented as a discontinued
operation would not be considered a change in an entity’s internal organization that causes the
composition of its reportable segments to change. Accordingly, prior periods would not need to be
restated.
Example 4-4
Company A has identified the following reportable segments: computer hardware, computer software, and
customer service. Before year-end, A disposed of a portion of its computer hardware segment, and the
disposal does not meet the criterion to be presented as a discontinued operation.
In preparing the current-year segment disclosures, A is not required to restate prior-period segment
information to remove the portion of the computer hardware segment disposed of before year-end or to
quantify the effect in the segment footnote.
4.9.4 Changes After Year-End but Before the Financial Statements Are Issued
The SEC staff made the following observation in its Current Accounting and Disclosure Issues in the
Division of Corporation Finance (updated November 30, 2006) related to what happens when an entity
changes its internal structure after year-end but before the financial statements are issued:
If management changes the structure of its internal organization after fiscal year end, or intends to make a
change, the new segment structure should not be presented in financial statements until operating results
managed on the basis of that structure are reported. Disclosures based on the historical reportable segments
should be presented until financial statements for periods managed on the basis of the new organizational
structure are presented. However, supplemental disclosure of the future effects of the changes may be useful.