The change could affect about one-third of all public companies, according to the FASB report. The segments of companies are typically broken down by geography or services.Īnother notable element of the proposal is that it would subject companies that currently report their financial results as a single entity to some of the proposed segment accounting rules. Investors have said that the additional information would give investors a better understanding of the companies’ different business activities and enable them to better assess potential future cash flows, the release states. About one-third of investors have indicated that they were “somewhat dissatisfied” with the existing accounting standards, according to the FASB formal proposal. The move toward the changes come in response to requests from investors who want to see improvements to the existing segment disclosure requirements that were issued in 2012. “On the basis of our extensive stakeholder outreach, the proposed ASU would provide investors and other allocators of capital with valuable insights into significant segment expenses, expand segment disclosures reported in interim periods, and require disclosures for single-segment entities.” The proposal would represent the standards setter’s “most significant change to segment reporting since 1997,” FASB Chair Richard R.Companies would also need to disclose their business units’ individual expense information on top of the information on so-called segment revenue and measures of profit and loss currently required. Under the proposal, publicly-traded companies would have to break out data on their business units’ performances quarterly and annually rather than just annually.The Financial Accounting Standards Board (FASB) Thursday issued a proposed update to accounting rules that would require public companies to include more frequent and comprehensive financial data on their business units or “segments” in financial reports.
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