Segment reporting is when a company provides reporting of the operating segments of the company in the disclosures accompanying its financial statements (What is segment, 2011). Segment reporting is required for publicly held entities but is not required for privately held entities (What is segment, 2011). Under Generally Accepted Accounting Principles (GAAP), an operating segment will engage in business activities from which the segment may earn revenue or incur expenses, has discrete financial information available, and whose results are regularly reviewed by the entity’s chief operating decision maker for performance assessment and resource allocation decisions (What is segment, 2011). Segment reporting is useful because it helps make the profits and risk situations of the segments of an entity more transparent for the stakeholders. There are a different set of accounting standards within different countries, the Financial Accounting Standards Board (FASB) believes that the ideal outcome of cooperative international accounting standard-setting efforts would be the worldwide use of a single set of high-quality accounting standards for both domestic and cross-border financial reporting, currently there is no single set of high-quality international accounting standards that is accepted in all capital markets (Overview of FASB’s, n.d.). Implementing an international set of accounting standards will set the same standards for everyone to follow and companies outside the U.S. will not have to reconcile their reports to meet the U.S. accounting standards. Currently there is a set of International Financial Reporting Standards (IFRS). They have released IAS 14 which the objective is to establish principles for reporting financial information by line of business and by geographical area, or segment reporting (IAS 14, 2011). Chinese accounting standards has issued Accounting Standards for Business Enterprises (ASBE) 35 which requires one basis of segmentation to...
References: Epstein, B. J., & Jermakowicz, E. K. (2009, April). IFRS converges to U.S. GAAP on segment reporting. Retrieved July 24, 2011, from http://www.journalofaccountancy.com/Issues/2009/Apr/20081008.htm
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China’s new accounting standards: A comparison with current PRC GAAP and IFRS. (2006, August). Retrieved July 25, 2011, from http://www.iasplus.com/dttpubs/0607prcifrsenglish.pdf
IAS 14 segment reporting. (2011). Retrieved July 23, 2011, from http://www.iasplus.com/standard/ias14.htm
Overview of FASB’s international activities. (n.d.). Retrieved July 23, 2011, from http://www.fasb.org/intl/index.shtml
What is segment reporting? (2011, April 7). Retrieved July 24, 2011, from http://www.accountingtools.com/questions-and-answers/what-is-segment-reporting.html
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