FASBs’ Amendments to Segment Reporting Disclosure Requirements

Segment reporting remains an important element of financial reporting for public entities. The fundamental principle of Topic 280, Segment Reporting, is that a company’s segment disclosures should be consistent with management’s reporting structure. The primary objective is to enable users of financial statements to “see a company’s business performance through the eyes of management,” i.e., how management assesses and evaluates the performance of the business. Segment reporting disclosures enable financial statement users to be better positioned to understand the public entity’s performance, assess its prospects for future cash flows, and make more informed judgments about the entity’s current performance and prospects.

FASB, in its continuous efforts to improve the disclosure requirements for segment reporting of public entities, has introduced amendments to Topic 280. The amendment results from FASB’s extensive outreach with the investors, who indicated that enhanced disclosures about a public company’s segment expenses would enable them to develop more decision-useful financial analysis. With this objective in mind, the amendment requires public entities to provide additional details about certain expense items related to the entity’s reportable segment(s).