5.4 Information About Products and Services
ASC 280-10
50-40 A public entity shall report the revenues from external customers for each product and service or each
group of similar products and services unless it is impracticable to do so. The amounts of revenues reported
shall be based on the financial information used to produce the public entity’s general-purpose financial
statements. If providing the information is impracticable, that fact shall be disclosed.
As noted in Section 5.1, an
entity that bases its segments on products and services will generally not have to repeat
the entity-wide disclosures of revenue by product and service since it would have disclosed
revenue from external customers as part of its segment disclosures in accordance with ASC
280-10-50-22 (see Section 4.3 for
further discussion). However, when a range of products and services is provided by a
reportable segment, an entity should consider whether these products and services are
sufficiently similar that additional disclosure would not be needed to meet the requirements
in ASC 280-10-50-40. Such additional disclosures may also be particularly important when the
entity has identified a single reportable segment.
Example 5-1
Company A has determined that it has three reportable segments
that are based on the following geographies: America, Europe, and the rest of
world. Company A’s two product lines are sold in all three geographic segments,
but its two service lines are provided only in the America and Europe
segments.
Even though its reportable segments are based on geography, A is still required
to disclose the amount of revenue attributable to its products and service lines
for the entity as a whole. Therefore, A would disclose that it sells two product
lines in all three segments and provides two service lines in the America and
Europe segments.
ASC 280 does not provide further guidance on evaluating whether a group of
products or services is similar for disclosure purposes. We believe that an entity
may look to the aggregation criteria in ASC 280-10-50-11 to determine whether groups
of products or services are similar.
The SEC staff has also provided guidance on determining whether groups of products and services are
similar in its Current Accounting and Disclosure Issues in the Division of Corporation Finance (updated
November 30, 2006), which states:
Registrants should remember to identify the products and services from which each reportable segment
derives its revenues, and to report the total revenues from external customers for each product or service or
each group of similar products and services. Disclosures for products and services that are not substantially
similar must be disaggregated. The staff has objected to overly broad views of what constitutes similar
products. In its assessment of whether dissimilar products have been aggregated, the staff may review public
disclosures and marketing materials that describe the registrant’s products.
In addition, paragraph 68 of the Background Information and Basis for Conclusions of FASB Statement 131 states, in part:
An enterprise with a relatively narrow product line may not consider two products to be similar, while an
enterprise with a broad product line may consider those same two products to be similar. For example, a
highly diversified enterprise may consider all consumer products to be similar if it has other businesses such
as financial services and road construction. However, an enterprise that sells only consumer products might
consider razor blades to be different from toasters.
When complying with the disclosure guidance in
ASC 280-10-50-40, entities should be aware that
the SEC staff has objected to the presentation of
entity-wide disclosures that are determined to be
based on individually tailored accounting
principles. See Section
4.3.3 of Deloitte’s Roadmap Non-GAAP Financial Measures
and Metrics for further discussion
of individually tailored accounting
principles.