Sec 10k report

Segments Dr. John Yelle

ACCT 424

Week #4

“Not so Legal” legal disclaimer…

 These lecture notes cover the topic of segment reporting and its general

requirements. For your 10-K based paper on segment and NCI rules and

reporting requirements, you are expected to utilize resources outside the

classroom to address the key requirements – which include the history and

development of these rules and the specific identification of the rules and

ASCs over time

 Do not use these notes (or Rogers) as a source or citation in your paper

Management Approach to Segments

 FASB rules define operating segments by emphasizing a ‘‘management

approach’’. This is a focus that approaches segment reporting in how

management organizes information for purposes of making operating

decisions and assessing performance

 The segments which emerge from an analysis of how management

organizes information for decision-making purposes are referred to as

“Operating segments”

 Operating segments that meet certain thresholds get publically reported as

same and are referred to as “Reportable Segments”

Operating Segments as Identified by

the Management Approach

 An Operating Segment is division or component of a company that:

 Earns revenues and incurs expenses

 Has results of operations that are regularly reviewed by the company’s

executive-level operating decision makers to make decisions about resources to

be allocated to the segment and assess its performance

 The Operating Segment has discrete financial information available to be

reviewed and worked towards

Reportable Segments as Defined by

FASB Rules

 A Reportable Segment is an Operating segments that satisfies at least one of the following requirements:

 The segment’s reported revenue, to include both external sales and intercompany sales or transfers, is 10% or more of the combined revenue, internal and external, of all Reportable Operating Segments

 The amount of the Reportable Operating Segment’s profit or loss is 10% or more of the greater of:

 The combined profit of all operating segments that did not report a loss, or

 The combined reported loss of all operating segments that did report a loss

 The assets of the Reportable Operating Segment are 10% or more of the combined assets of all operating segments

 The number of Reportable Segments should total at least 75% of total consolidated revenue

 The if the number of Reportable Segments per the above is more than ten, it is preferable to consolidate some of them until no more than ten Reportable Segments remain

Reportable Segment Disclosures

 Profit or loss activities that follow how management approaches the

analysis of same

 Assets that are identifiable / assignable to the Reporting Segment

 Other disclosures of note that relate to that Reportable Segment

 Information presented for Reportable Segments is reconciled to the

consolidated amounts for the company on the whole