4.5 Segment Reporting
Under ASC 280, carve-out financial statements for public entities (as defined in ASC 280, subject to
the scope exceptions in ASC 280-10-15-3) must include reportable segment disclosures for all periods
presented. Nonpublic entities are not required to provide segment disclosures, although they are
encouraged to do so.
As discussed in Section
2.2.1, management must first determine the reporting structure and
operating segments of the carve-out entity.1 Because the reporting structure of the carve-out entity may differ from that
of the parent, the carve-out entity’s operating segments could be different as well.
Next, management must determine the reportable segments in accordance with the
criteria in ASC 280-10-50-10, which states, in part:
A public
entity shall report separately information about each operating segment that
meets both of the following criteria:
- Has been identified in accordance with paragraphs 280-10-50-1 and 280-10-50-3 through 50-9 or results from aggregating two or more of those segments in accordance with the following paragraph
- Exceeds the quantitative thresholds in paragraph 280-10-50-12.
Because the intent of carve-out financial statements is to isolate the carve-out entity’s operations
from the parent’s financial statements, the amounts used to determine the quantitative thresholds
(mentioned in ASC 280-10-50-10(b) above) would be based on the carve-out entity.
For more information on this topic, see Deloitte’s Roadmap Segment Reporting.
Footnotes
1
The carve-out entity may be required to determine operating
segments regardless of whether it must include segment disclosures in its
financial statements under ASC 280, since this determination affects the
identification of the carve-out entity’s reporting units for goodwill
impairment testing purposes.