Segment reporting is meant to provide deeper transparency on a companys financial situation. It provides more information
Question:
Segment reporting is meant to provide deeper transparency on a company’s financial situation. It provides more information about the company’s specific sources of revenue and net income and discloses where a company’s assets are allocated. This helps users of the financial statements identify specific business segments, geographical areas and clients that are more profitable than others and help users make better informed decisions about the company.
The argument has been made that too much dissecting and disassembling of information can result in competitive harm to a company. Competitors can use the segment information to identify a company’s weaknesses and strategy and use that to target a company’s markets. In fact, the IASB considered making segment reporting optional, but ultimately decided not to give companies an exemption from providing segment information if they believed that it would lead to competitive harm.
REQUIRED:
a. Discuss whether you think all public companies should be required to disclose segment reporting as is currently the case, or should it be exempt if the company feels the information could lead to competitive harm?
b. IFRS 8 requires a company to disclose revenues and non-current assets by country if management believes these numbers are material. However, IFRS does not specify how to determine materiality in this case. What factors could a company consider in determining whether an individual foreign country is material to its operations?