Deloitte
Accounting Research Tool
...
On the Radar

On the Radar

On the Radar

ASC 280-10-10-1 states that the objective of segment reporting “is to provide information about the different types of business activities in which a public entity engages and the different economic environments in which it operates to help users of financial statements do all of the following:
  1. Better understand the public entity’s performance
  2. Better assess its prospects for future net cash flows
  3. Make more informed judgments about the public entity as a whole.”
In applying the segment reporting guidance in ASC 280, an entity should perform each of the following key steps:
Image cannot be displayed
An entity’s first step is to identify its operating segments. It performs such identification by using the management approach. As indicated in ASC 280-10-50-1, “[a]n operating segment is a component of a public entity that has all of the following characteristics:
  1. It engages in business activities from which it may recognize revenues and incur expenses . . . .
  2. Its 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.
  3. Its discrete financial information is available.”
Image cannot be displayed
Once an entity has identified its operating segments, it determines which of them to report.
Image cannot be displayed
Once an entity determines which of its operating segments may be aggregated, it must apply the quantitative threshold guidance (i.e., the 10 percent tests that are based on revenue, profit or loss, and assets) in ASC 280 to determine which segments to report separately. An operating segment needs to meet only one of the 10 percent tests in ASC 280 to be a reportable segment, although it may meet more than one.
Image cannot be displayed
After an entity has identified its reportable segments, it must provide the following types of quantitative and qualitative disclosures for each of them, generally for each period presented:
  • General information.
  • Information about segment profit or loss and assets.
  • Reconciliations to consolidated amounts.
Image cannot be displayed
Entities are required to disclose information about products and services, geographical operations, and major customers on an entity-wide basis regardless of how the entity is organized.