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BATAAN PENINSULA STATE UNIVERSITY

MAIN CAMPUS
Capitol Compound, Tenejero, City of Balanga 2100 Bataan
GRADUATE SCHOOL
P Phone Number: (047) 237-6658 www.bpsu.edu.ph

A Perspective On Segment Reporting Choices And Segment

Reconciliations

I. SUMMARY OF THE ARTICLE

This paper highlights the usefulness and implications of segment reporting .

Segment reporting arose due to the need to better understand the

performance of companies because it provides important source of

information about the company’s operation and prospect. It involves breaking

down the enterprise into its constituent parts or segments and reporting

financial information for each of these.

The Financial Accounting Standard Board (FASB) established in 1973, is

currently the primary organization responsible for representing the private

accounting sector in prescribing accounting principles and procedures. In this

journal, it was shown that the primary objective of the FASB was to help

investors, creditors and others assess the amount of timing of prospective

cash flows (FASB 1978). The Statements of Financial Standards or SFAS

presents rules and guidelines for preparing, presenting and reporting financial

statements according to Generally Accepted Accounting Principles (GAAP).

The FASB issued the Statement of Financial Accounting Standards No.14

(SFAS 14) , “Financial Reporting for Segments of a Business

Our Vision  Our Mission 

A leading university in the Philippines recognized for its proactive To develop competitive graduates and empowered community members by providing relevant, innovative
contribution to Sustainable Development through equitable and inclusive and transformative knowledge, research, extension and production programs and services through
programs and services by 2030. progressive enhancement of its human resources capabilities and institutional mechanism.
BATAAN PENINSULA STATE UNIVERSITY
MAIN CAMPUS
Capitol Compound, Tenejero, City of Balanga 2100 Bataan
GRADUATE SCHOOL
P Phone Number: (047) 237-6658 www.bpsu.edu.ph

Enterprise" in 1976” requiring firms to use Industry Approach requiring

firms to report about the industry and geographic segments in financial

statements. The insufficiency of information and criticisms of segment

information disclosed by some companies under SFAS 14 led to the issuing

of SFAS 131 on “ disclosures about segments of an enterprise and

related information by FASB in 1997. SFAS 131 adopted the management

approach and was issued to enable external users to see companies through

the eyes of management.

In addition, International Financial Reporting Standard 8 (IFRS 8),

“Operating Segments” which aligns segment reporting with the

requirements of SFAS 131 by requiring firms to implement the management

approach to disclose the financial performance of its operating segments.

Meanwhile, segment reconciliation was also discussed in this journal.

Segment reconciliation involves the reconciliation of aggregated segment

earnings with firm-level consolidated earnings. It was also illustrated in Figure

1 the segment reconciliation process on how the level of detail that firms

provide in their segment disclosure varies widely across organizations. One

example of segment reconciliation – the Goodyear Tire and Rubber

Company. which is one of the world's leading manufacturers of tires .

Our Vision  Our Mission 

A leading university in the Philippines recognized for its proactive To develop competitive graduates and empowered community members by providing relevant, innovative
contribution to Sustainable Development through equitable and inclusive and transformative knowledge, research, extension and production programs and services through
programs and services by 2030. progressive enhancement of its human resources capabilities and institutional mechanism.
BATAAN PENINSULA STATE UNIVERSITY
MAIN CAMPUS
Capitol Compound, Tenejero, City of Balanga 2100 Bataan
GRADUATE SCHOOL
P Phone Number: (047) 237-6658 www.bpsu.edu.ph

II. IMPLICATIONS OF THE RESULT OF THE STUDY

By reading the journal, the implications and importance of disclosure of segment

information issued by major standard settler such as FASB. The advocacies for

companies to disclose adequate segment information was to enable users to

make informed decisions which resulted in the issuing of various standards such

as SFAS 14, SFAS 131 , and IFRS 8. Revisions or replacement of standards on

segment reporting were due to reported deficiencies or criticisms by financial

statement users and other stakeholders. The issuance of SFAS 14 using the

industry approach had little impact on segment reporting. The identification of

segments based on the management approach has resulted in increased

disclosure using the SFAS 131 compare to SFAS 14 thus FASB believes that the

information provided in the management approach illustrates a greater degree of

useful information about the company’s different segments which will put them in

better position to interpret and analyze management decisions and assess its

reliability for management projections in the future. It was also found out that the

key advantage of segment reporting is transparency and that management

should give close scrutiny to segment reconciliation.

Research results suggest that the limitation of SFAS 14, SFAS 131 and IFRS 8

findings may be important for policy, practice, theory, and subsequent research.

Our Vision  Our Mission 

A leading university in the Philippines recognized for its proactive To develop competitive graduates and empowered community members by providing relevant, innovative
contribution to Sustainable Development through equitable and inclusive and transformative knowledge, research, extension and production programs and services through
programs and services by 2030. progressive enhancement of its human resources capabilities and institutional mechanism.
BATAAN PENINSULA STATE UNIVERSITY
MAIN CAMPUS
Capitol Compound, Tenejero, City of Balanga 2100 Bataan
GRADUATE SCHOOL
P Phone Number: (047) 237-6658 www.bpsu.edu.ph

III. RECOMMENDATIONS

More research should also be done to answer the realibity of segment

disclosures under SFAS 131. In addition, it is recommended that more post

implementation reviews by the IASB and academic researches into the IFRS 8 in

order to address more concerns and improve the quality of segment reporting

standards.

Some of the suggestions in the improvement of the journal includes:

1. Some key words and accounting terms should be given proper definition

by the writer so the reader can understand those terms.

2. The writer should give more clear examples about segment reporting and

the non-compliance of some companies to industry and management

approaches in SFAS 14 and SFAS 131 and IFRS 8.

Our Vision  Our Mission 

A leading university in the Philippines recognized for its proactive To develop competitive graduates and empowered community members by providing relevant, innovative
contribution to Sustainable Development through equitable and inclusive and transformative knowledge, research, extension and production programs and services through
programs and services by 2030. progressive enhancement of its human resources capabilities and institutional mechanism.