FASB will review business segment reporting concerns

Although a post-implementation review of FASB’s standard on business segment reporting was mostly favorable, FASB announced Wednesday that it will consider whether additional review is needed and will meet with stakeholders and SEC staff to discuss concerns raised during the review.

The Financial Accounting Foundation (FAF) post-implementation review released in January affirmed the general effectiveness of FASB Statement No. 131, Disclosures About Segments of an Enterprise and Related Information, which is codified in ASC Topic 280, Segment Reporting.

But the post-implementation review report also said there is room for improvement in the standard. One challenge described in the report involves the way changes in technology affect the determination of what information is reviewed by a company’s chief operating decision-maker.

The report also said some preparers and practitioners would like more guidance on certain operational aspects of the standard. Some users would like additional and comparable information to be presented by segment, according to the report.

The overall conclusion of the report was that Statement No. 131 achieves its purpose and results in more information being provided about an organization’s business activities than the previous standard.

FASB believes that any plan for a separate project to review the standard should be coordinated with the International Accounting Standards Board (IASB) to maintain convergence in segment reporting. The IASB is reviewing IFRS 8, Operating Segments, which is substantially converged with Statement No. 131.

FASB will report back to FAF’s trustees and oversight committee as progress is made, FASB Chairman Leslie Seidman said in a news release.

Established in 1997, Statement No. 131 governs the way public companies report information about their business segments. It also contains standards for related disclosures about products and services, geographic areas, and major customers.

—Ken Tysiac (ktysiac@aicpa.org) is a JofA senior editor.