Disclosure Of Segment Information Research Articles

Redaction as a Response to SFAS No. 131’s Mandatory Disclosure of Segment Information

Redaction as a Response to SFAS No. 131’s Mandatory Disclosure of Segment Information

Obelodanjivanja o segmentima u finansijskim izveštajima akcionarskih društava u Republici Srbiji i Republici Hrvatskoj

Information about the segments of a company is an important basis for making business decisions. In order for decisions based on segment information to be adequate, that information should be communicated in accordance with regulations. This paper is aimed at examining the adequacy of the segment information of listed companies in the Republic of Serbia and the Republic of Croatia and determining whether the volume of disclosed financial segment information is related to the company size and character of the audit firm. The research reveals that, in general, the disclosure of segment information is not fully in line with the International Financial Reporting Standard 8 - Operating Segments and that the joint-stock companies with a higher value of their total assets disclose financial segment information in more detail. However, there is no statistically significant difference in the amount of the segment information disclosed between the companies whose financial statements are audited by large audit firms and those that are the clients of other audit firms.

Analisis Penerapan PSAK 5 (Revisi 2009) terhadap Pengungkapan Segmen Operasi pada Perusahaan Manufaktur yang Terdaftar di Bursa Efek Indonesia (BEI)

The International Accounting Standards Board (IASB) is committed to improve their standards’ quality, which is the global accounting standards that reflect information in financial statements as transparent and comparable for public purposes. The International Accounting Standards (IAS) and the International Financial Reporting Standards (IFRS) provide guidelines in creating and interpreting companies’ financial statements (Iatridis & Dalla, 2011). The purpose of this research was to assess the impact of the application of PSAK 5 (revised 2009). PSAK 5 (revised 2009) requires segment disclosure based on the internal reporting reviewed by the operation decision maker. PSAK 5 (revised 2000) requires companies to disclose segments information based on the format of the primary and secondary segments as identified per products / services that generate the same level of risk and return. The six analytical frameworks developed for this research, namely: (1) analysis of the presentation of segment information based on PSAK 5 (revised 2000) versus PSAK 5 (revised 2009), (2) analysis of the determination and identification of operational decision-making, (3) the analysis of the definition and identification operating segments between industry sectors, (4) analysis of segment aggregation, (5) analysis of determination of the reportable segments, and (6) analysis of reported segment disclosures. In conclusion, generally, the disclosure of segment information based on PSAK 5 (revised 2009) by using the management approach yields a more complete segment report, by conveying more relevant segmental information from the standpoint of management's internal performance than the previous standard, which was PSAK 5 (revised 2000). 
 This research found significant changes related to an increase in the disclosure of segment disclosure in business segments, segment aggregation, and basic information on company's segmental performance measurement in Indonesia.

Post-implementation of MFRS 8 “Operating Segment” among listed firms in Malaysia

This study examined the level of disclosure among Malaysian listed firms with respect to segment reporting under new accounting standard MFRS 8 (IFRS 8). It also aimed to determine how these firms defined the chief operating decision maker (CODM) during the disclosure of segment information. Study results showed that the way firms disclosed segment information tended to vary between companies, since disclosure was dependent on company management purposes and business activities. The results also showed that only a few Malaysian firms supply information about their CODM. In summary, this study provides a fairly up-to-date description of the status of segment disclosure post-implementation of MFRS 8.

External Segment Reporting in the Republic of Serbia

Abstract The purpose of the research in this paper is to examine the regulation and practices of external segment reporting in the Republic of Serbia. The importance of research stems from a great potential usefulness of segment information for investors and creditors. The analysis of regulation suggests that the Republic of Serbia has high-quality and internationally recognized basis of external segment reporting – IFRS 8. However, there is a room for improvement of IFRS 8. The analysis of practices, conducted on a sample of 500 companies, shows that companies in the Republic of Serbia, in general, do not attach great importance to the disclosure of segment information in financial statements. The practices are quite miscellaneous, which is a consequence of the flexibility of IFRS 8, but also an incomplete compliance with IFRS 8. By applying statistical techniques we have examined whether the practices of external segment reporting are related to characteristics of companies, which makes the originality of the paper. We have found that financial institutions disclose more extensive quantitative segment information in relation to other companies in the Republic of Serbia, and that companies with higher assets disclose more extensive segment information. The research indicates that there is a significant room for improving the practices of external segment reporting in the Republic of Serbia. The research results may be useful for regulators of financial reporting and preparers and auditors of financial statements.

Towards the Usefulness and Implications of Segment Reporting Standards

The paper examines the usefulness and implications of segment reporting standards based on the review of extant literatures. Segment reporting provides information about an entity’s operations which enables users of financial reports to assess and make informed decision on the true position and performance of the business and geographical segments a diversified entity is operating. The advocacies to make companies disclose adequately segment information resulted in the issuing of various segment standards such as Statement of Financial Accounting Standards (SFAS) 14 and 131, International Accounting Standards (1AS 14) and IAS 14R and lastly International Financial Reporting Standards (IFRS) 8.The amendments to, and/ or replacement of the standards were due to the reported deficiencies and/or criticisms by users of financial statements and other stakeholders. Following the convergence project of the IASB and US FASB, the IFRS 8 which was a replica of SFAS 131 was adopted for reporting segment information. Although IFRS 8 has been found to result in increased disclosure of segment information, there are various concerns and criticisms of the standard. These concerns and criticisms are significant enough to undermine the usage of IFRS 8 and render it less relevant. Therefore the paper recommends more post implementation reviews by the IASB and academic researches into the IFRS 8 in order to address these concerns and improve the quality of segment reporting standards. DOI: 10.5901/mjss.2015.v6n6p30

Voluntary Disclosure of Segment Information in a Regulated Environment: Australian Evidence

Based on annual report data for a sample of 118 companies listed on the Australian Stock Exchange, this study provides further empirical evidence of the association between the voluntary disclosure of segment information and a firm’s level of diversification; controlling for firm size, industry membership, the level of minority interest, leverage, and ownership diffusion. The period examined falls between the introduction of the first Australian standard on segment disclosure in 1986 and its subsequent revision in 2001. In particular, the study focuses on segment information that was not required to be disclosed in the original standard but which standard setters subsequently felt sufficiently important to include as part of the mandated disclosure requirements in the revised standard. Consistent with expectations, based on both agency theory and proprietary costs theory, our logistic regression results confirm that greater levels of diversification are likely to be associated with additional voluntary segment disclosure.

An Analysis of Segment Disclosures under SFAS No. 131 and SFAS No. 14

The purpose of this paper is to compare the segment reporting disclosures under SFAS No. 131 with those reported the previous year under SFAS No. 14. Under SFAS No. 131, firms are required to report segments consistent with the way in which management organizes the business internally. In addition, the accounting items disclosed for each segment are defined consistent with internal segment information used to assess segment performance. For many companies, this represents a significant change from the approach used to report segments under SFAS No. 14. Under SFAS No. 14, firms were required to disclose segment information by both line-of-business and geographic area with no specific link to the internal organization of the company or the measurements that were used for internal decision making. As a result, many complained that the resulting disclosures were highly aggregated and of limited use for decision-making purposes. We find that the change in segment reporting requirements under SFAS No. 131 has made a relatively significant impact on the disclosure of segment information. Over two-thirds of the sample firms have redefined their primary operating segments upon adopting SFAS No. 131. There has also been an increase in the number of firms providing segment disclosures and companies are disclosing more items for each operating segment. For enterprise-wide disclosures, the proportion of country-level geographic segment disclosures has increased, while the proportion of broader geographic area segment disclosures has decreased. However, the number of firms reporting earnings by geographic area has declined greatly as this item is no longer required to be disclosed for firms reporting on a basis other than geographic area.

Determinants of voluntary disclosure of segment information: A re‐examination of the role of diversification strategy

AbstractThis paper explores the determinants of management's decision to voluntarily disclose segment information. It is an extension of McKinnon and Dalimunthe (1993) who investigate the role of six hypothesised determinants. Their results indicate that firm size, industry membership, ownership diffusion, and the level of minority interest are related to the voluntary disclosure of segment information. However, they find that leverage and diversification into related versus unrelated industries are not related to this disclosure. It is the diversification finding that motivates our work. This paper explores the effect of differences in data, differences in samples, and differences in the measurement of diversification on the McKinnon and Dalimunthe (1993) results. Using an alternative definition of diversification, we find diversification strategy, firm size, and the level of minority interest to be related to segment disclosure while the results for ownership diffusion and industry are mixed. We find no support for a leverage effect.

VOLUNTARY DISCLOSURE OF SEGMENT INFORMATION BY AUSTRALIAN DIVERSIFIED COMPANIES

Abstract:This paper reports an examination of economic incentives motivating listed diversified companies in Australia to voluntarily disclose segment information. The study is based on a sample of 65 listed diversified companies. Support is found for ownership diffusion, the level of minority interest in subsidiaries, firm size and industry membership as factors influencing the voluntary disclosure of segment information. No support is found for leverage or diversification into related versus unrelated industries.

Incentives for Segment Reporting

FASB Statement No. 14 (December 1976) requires the disclosure of certain segment information, consistent with the actions of other regulatory bodies (the Securities and Exchange Commission in 1969 and 1970 and the Federal Trade Commission in 1974). A number of studies during the past ten or so years have focused on whether segment information is perceived as whether it improves the prediction of earnings, or whether it affects stock prices. While the findings of these studies have been generally consistent with the hypothesis that segment information is both used and useful, none of the investigations addressed aspects that are pertinent to the fundamental issue of whether a requirement that segment information be disclosed produces net social benefits. In particular, an important aspect which has not been addressed in the motivation for voluntary disclosure of segment information. Voluntary disclosures of segment revenues were fairly common even prior to the imposition of the first SEC requirement in 1969. For example, Hobgood [1971] reports that in the years 1967-69, about one-half of a sample of 614 companies, out of a population of 1,500 companies whose annual reports were received by the Financial Executives Institute Library, disclosed segment revenues voluntarily. Thus, one can assume that certain corporations would have chosen to disclose segment data voluntarily in the absence of any requirement by a regulatory body.1 In this paper we attempt to offer a framework to explain voluntary disclosures of segment information. Specifically, we identify a set of