In: Accounting
Sony has two businesses with different financial trends, should the consolidated financial statements provide specific segment disclosure information? What should the company disclose?
Segment reporting is the reporting of the operating segments of a company in the disclosures accompanying its financial statements. Segment reporting is required for publicly-held entities, and is not required for privately held ones. Segment reporting is intended to give information to investors and creditors regarding the financial results and position of the most important operating units of a company, which they can use as the basis for decisions related to the company.
Under Generally Accepted Accounting Principles (GAAP), an operating segment engages in business activities from which it may earn revenue and incur expenses, has discrete financial information available, and whose results are regularly reviewed by the entity's chief operating decision maker for performance assessment and resource allocation decisions. Follow these rules to determine which segments need to be reported:
The information you should include in segment reporting includes:
A reportable segment is a phrase that relates to international accounting procedures. An exploitable segment is a portion of a business that generates its own revenues and expenses and has its own assets and liabilities. A reportable segment is an exploitable segment that makes up at least 10 percent of the overall business's revenues or assets. In effect, a reportable segment is like a business within a business. International accounting standards require that public companies disclose each segment’s financial activities separately, as well as include that information in the corporation’s aggregate statements.
Publicly traded businesses that prepare their financial statements in accordance with international accounting standards must disclose information about each of their reportable segments. This means that each segment’s activities must be listed separately as well as included in the business’s overall performance data. These disclosures must discuss why each listed segment qualifies as reportable. The business must provide how much income and expenses the segment generated. The business also must separately list all of the assets and liabilities specifically tied to the reportable segment.