Discussion Week 5

Page 1 of 1 Accounting III

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Segment Reporting and Decentralization Segment Reporting and Decentralization. Decentralization is the process of spreading out the decision-making authority throughout the company instead of just having this responsibility with a few at the top of the organization. It is important that in order for decentralization to work well that there is a way to hold those accountable for their areas they are over. This has led to the development of responsibility centers. A segment is a piece of a company about which managers would like cost information or other information. You might have a division as a segment or product line or marketing channel. Before we look at the formula, let's look at a new term – Traceable Fixed Cost. The fixed cost part of the term is the same as you have learned in the past. But the word traceable put in front of it means it is traceable to that segment, so if the segment were to be eliminated the traceable fixed cost would be eliminated as well. A common fixed cost is one that supports the entire organization and can't be traced to a specific segment. These costs will not be eliminated if any particular segments were eliminated.