Question

ASC 280 discusses the specific disclosures for reporting segment information. ASC 280 allows the aggregate of more than two operating entities to be reported as a single operating unit. The basis of grouping could be the nature of the production process, the type of customer, the distribution similarity, and finally, the nature of the products or services. How does grouping of operating entities assist (or not assist) in providing transparent information to key decision makers? Why?

Answer 1

Management Approach is used as a method to determine which information to be reported. Management organizes the segments within the public entity for making operating decisions and assessing performance of the entity. The segments should be able to provide required information in a cost effective & timely manner. It focuses on financial information that decision makers use to make decisions about the entity's operating matters. To provide comparability between entities, this requires entity to report certain information regarding each product or service & the countries in which it holds assets & earn revenue which the company derives. The information helps decision makers to better understand enterprise performance. It helps to better asses the future prospects regarding its future cash flows. It allows decision makers to more informed judgements about enterprise as a whole.