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Lecture Advanced accounting (6th Edition): Chapter 14 - Jeter, Chaney

Chapter 14 - Reporting for segments and for interim financial periods. We’ve spent most of the semester trying to combine two or more entities’ statements into a single accounting entity. Now we’re going to do just the opposite – take a single entity and break it into segments for reporting purposes. This chapter also covers the most recent rulings for interim financial reporting. | Reporting for Segments and for Interim Financial Periods 1 Learning Objectives Understand the need for disaggregated financial data. Describe the basic requirements of public companies in reporting segmental data. Determine an operating segment. Define a reportable segment. Identify the information to be presented for each reportable segment. 2 Learning Objectives Explain when and what types of geographic data must be reported. Explain when information about major customers must be reported. Compare the international accounting standards for segmental reporting with the U.S. requirements. Describe current requirements for companies to report interim information. Indicate some problems with interim reporting and the authoritative position on the issue. 3 Need for Disaggregated Financial Data Users need information to determine conditions, trends, and ratios that assist in predicting cash flows of firms. Different industries or geographic areas have different rates of profitability, opportunities for growth, and types of risk. Disaggregated information is useful to assist in analyzing uncertainties surrounding the timing and amounts of expected cash flows. 4 LO 1 The need for disaggregated financial data. Standards of Financial Accounting and Reporting FASB ASC topic 280 (Segment Reporting): Segmental disclosures have limitations as well as strengths. Primary benefit - unveiling information that has been merged and possibly buried in the consolidated data. Arguments against segmental disclosures include: May be misleading or meaningless due to accounting and allocation problems, lack of user knowledge, different measurement techniques. Disclosures to competing firms, labor unions, etc. Adds to already excessive amount of accounting detail. Most people believe the advantages outweigh the disadvantages. 5 LO 2 Basic disclosure requirements. Standards of Financial Accounting and Reporting In general, the FASB implemented a management approach: Focusing on the way in . | Reporting for Segments and for Interim Financial Periods 1 Learning Objectives Understand the need for disaggregated financial data. Describe the basic requirements of public companies in reporting segmental data. Determine an operating segment. Define a reportable segment. Identify the information to be presented for each reportable segment. 2 Learning Objectives Explain when and what types of geographic data must be reported. Explain when information about major customers must be reported. Compare the international accounting standards for segmental reporting with the U.S. requirements. Describe current requirements for companies to report interim information. Indicate some problems with interim reporting and the authoritative position on the issue. 3 Need for Disaggregated Financial Data Users need information to determine conditions, trends, and ratios that assist in predicting cash flows of firms. Different industries or geographic areas have different rates of profitability, .