FASB to Revisit Segment Reporting Standard
As investors and analysts’ frustrations continue over segment reporting, the Financial Accounting Standards Board (“FASB”) plans to improve the consistency and application of its guidance. The FASB wants to amend Accounting Standards Codification (“ASC”) 280, Segment Reporting, which requires businesses to disclose information regarding management’s decision-making process and methods for reviewing segment performance. The standard also lists disclosure requirements on products and services, geographic regions, and a company’s top customers.
Investors complain that the standard’s disclosure requirements can be excessively wide-ranging. They also say that the current guidance forces companies to group too many operating units, which makes it difficult to determine future performance. In contrast, companies are cautious to disclose confidential information or trade secrets.
Work on improving the standard is in the early stages. Instead of overhauling ASC 280, the FASB’s research staff will attempt to improve aspects such as the criteria used to aggregate segments. FASB project manager Lauren Mottley remarked that staff members intend to conduct extensive research to review their options before proposing any changes.