FASB Seeks Companies to Participate in Study on Segment Reporting

Chris Gaetano
Published Date:
Aug 7, 2018

The Financial Accounting Standards Board is looking for a few good public companies to take part in a study on improving aggregation criteria and the reportable segments process as part of the first phase of preparer outreach to be conducted by the FASB on segment reporting.

The ideal study participant is a public company with multiple operating segments that applies the aggregation criteria in the Accounting Standards Codification Topic 280, Segment Reporting. The FASB aims to explore two different options on improving aggregation and segment reporting: either reorder the process for determining reportable segments and move the quantitative thresholds earlier in that process or remove the aggregation criteria, thereby making each operating segment reportable until a practical limit is reached. 

Topic 280 provides guidance to public business entities on how to report certain information about operating segments in complete sets of financial statements of the public entity and in condensed financial statements of interim periods issued to shareholders. It also requires that public entities report certain information about their products and services, the geographic areas in which they operate, and their major customers.

An April report from Ernst & Young said that SEC staff comment letters often challenge companies’ determination of the chief operating decision maker, as well as their conclusions on identifying and aggregating operating segments. Companies also are frequently challenged about the adequacy of their entity-wide disclosures with respect to products and services. The report said that, from observing SEC commentary on the subject, it is clear that the agency believes that disaggregation of financial information is a benefit to investors. As a result, SEC staff are often skeptical when companies aggregate operating segments that separately would provide meaningful information to investors. 

The study will begin this month and will last for two to three months. The FASB expects to summarize the feedback this fall. Participants’ time commitments will vary based on the amount of detail an entity is able to provide about the reportable segments process. The FASB said that the project is not looking to fundamentally revise Topic 280. The point of the study is to better understand issues preparers may face in applying different potential alternatives to improve the existing segment aggregation criteria and reportable segments process.

Organizations interested in participating can follow this link

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