A number of companies voluntarily prepare segment reports beyond what is required by regulation. Given the...

A number of companies voluntarily prepare segment reports beyond what is required by regulation. Given the difficulties faced by regulators in developing rules for segment reporting, is regulation really necessary and/or desirable?

Expert Solution

In my opinion, rules for segment reporting is essential because:-

1. It ensures transparency in financial statements- Transparency is the cornerstone of financial reporting. Stakeholders are dependent on them for monitoring the organizations performance. Hence, regulations are pivotal for segment reporting.

2. Segment reporting data is used by investors in valuation models, so that they can decide and evaluate about their investments in company.

3. Segment reporting standards were set in 1990's, hence there is a need for regulation because they are not updated as per latest requirements of stakeholders.

4. Segment reporting disclosures are not generally reconciled with financial statements, and they are generally manipulated by companies as per their benefits.

Hence, segment reporting should be regulated to make it reporting better and correct.

In case of doubt please comment. It will be cool if you hit like.

ekkarill92 answered 6 months ago

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