A History of Segment Reporting
Often, the rules and regulations created by governing bodies are reactions to societal events and pressures. This pattern certainly holds true in regards to financial reporting. The first financial reporting regulations were set in place during the Great Depression in reaction to the stock market collapse of 1929. These regulations were The Securities Act of 1933 and The Securities Exchange Act of 1934, which established the Securities and Exchange Commission (SEC) and became the foundation for future financial reporting regulations. While addressing Congress, President Roosevelt said that the 1933 Act “…puts the burden of telling the whole truth on the seller. It should give impetus to honest dealing in securities and thereby bring back public confidence.”[1]
Some companies had already been publishing financial statements prior to these requirements, apparently believing that the benefits of disclosure outweighed the costs. However, there were no standards that governed these disclosures and some of the statements were basically useless. For example, a corporation released an annual report in 1902 that stated “[t]he settled plan of the directors has been to withhold all information from stockholders and others that is not called for by the stockholders in a body. So far no request for information has been made in the manner prescribed by the directors…”[2] I think that most investors would agree that the financial reports released by corporations today are far more useful than this sort of disclosure which happened prior to the enactment of the Acts of 1933 and 1934. Again, in the 1960’s societal pressures resulted in financial reporting changes. Amid the civil rights movement, the feminine movement, and the environmental movement, congressional hearings of the Subcommittee on Antitrust and Monopoly of the Senate Committee on the Judiciary began to investigate U.S. industries. During these hearings, in 1965, economics Professor Joel Dirlam recommended in his
Some companies had already been publishing financial statements prior to these requirements, apparently believing that the benefits of disclosure outweighed the costs. However, there were no standards that governed these disclosures and some of the statements were basically useless. For example, a corporation released an annual report in 1902 that stated “[t]he settled plan of the directors has been to withhold all information from stockholders and others that is not called for by the stockholders in a body. So far no request for information has been made in the manner prescribed by the directors…”[2] I think that most investors would agree that the financial reports released by corporations today are far more useful than this sort of disclosure which happened prior to the enactment of the Acts of 1933 and 1934. Again, in the 1960’s societal pressures resulted in financial reporting changes. Amid the civil rights movement, the feminine movement, and the environmental movement, congressional hearings of the Subcommittee on Antitrust and Monopoly of the Senate Committee on the Judiciary began to investigate U.S. industries. During these hearings, in 1965, economics Professor Joel Dirlam recommended in his