SEGMENTAL REPORTING

Assessment Of The Current Status Of The Proposed Joint Exposure Draft: Segmental Reporting

Assessment of the Current Status of the Proposed Joint Exposure Draft: Segmental Reporting

Introduction

IAS and FASB have been working to introduce a novel term in the field of financial reporting by the name of Segment accounting or Segment reporting. The notion behind this newer proposal draft is that the contemporary businesses and corporations have evolved as a sophisticated bodies engaged in multiple operations while investors are demanding greater level of transparency. The proposed draft is aimed to address these issues with two primary objectives that are disaggregation and cohesiveness.

Discussion

“Segment reporting is the disclosure of financial information about the major components of the company's various lines of businesses” (Bragg, 2010, pp. 292). It is only related on publicly held businesses. Deloitte on its website has summarized the IAS 14 in user friendly manner which will ease the process for the users of segment accounting. Bragg has highlighted three tests in this book which can be employed to check if the company is subject to segment reporting or not. In view of different accounting standards, PWC issued a practical guide on the topic in 2008 which comprehensibly covers the topic as well as compared the regulations as it is present in IAS14 and IFRS 8. Apart from these publications, few others were also consulted for reference purposes. However, fundamental analysis is based on above three publications.

Segment Reporting & IAS 14

IAS 14 is devoted exclusively to issues of disclosure - the recognition and evaluation of the elements described in the report it is not. In the case of presentation of the consolidated and also detached financial statements of parent, segment information should be submitted only in the form of consolidated financial statements. The purpose of IAS 14 which directly addresses segment reporting is to set up guidelines for the financial information reporting by segments (information on various types of goods and services produced by the company and various geographic regions in which it functions), in order to aid users of financial statements:

- To comprehend the firm performance in earlier years;

- Evaluate the risks and profits of the firm;

- Make more knowledgeable decisions about the firm as a whole.

IAS 14 should be implemented in absolute sets of issued financial statements that abide by International Financial Reporting aStandards. aA atotal aset aof afinancial astatements acomprises aof aa aincome astatement, aa abalance asheet, acash aflow astatement, astatement aof achanges ain aequity aand anotes, aas specified in IAS 1 that is "Presentation of Financial Statements". IAS 14 should be employed by publicly traded companies having equity or debt securities being traded in regular markets, and the entities that are in the course of issuing new equity or bonds in public securities markets.

If a firm whose equity or debt securities are not traded, preparing financial statements in accordance with international accounting standards, a firm promoted by the voluntary disclosure of segment ...