FASB has issued a proposed Accounting Standards Update (ASU) that would improve the disclosures about a public entity’s reportable segments and address requests from investors and other allocators of capital for additional, more detailed information about a reportable segment’s expenses. Stakeholders are encouraged to review and provide comments on the proposed ASU by Dec. 20, 2022.
Investors and other allocators of capital have observed that segment information is critically important in understanding a public entity’s different business activities. That information enables investors to better understand an entity’s overall performance and assists in assessing potential future cash flows. In addition, investors have observed that although information about a segment’s revenue and measure of profit or loss is disclosed in an entity’s financial statements, there generally is limited information disclosed about a segment’s expenses.
The amendments in the proposed ASU respond to feedback received from investors and other allocators and would improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The key amendments in the proposed ASU would:
Require that a public entity disclose, on an annual and interim basis, significant segment expenses that are regularly provided to the chief operating decision maker (CODM) and included within each reported measure of segment profit or loss.
Require that a public entity disclose, on an annual and interim basis, an amount for other segment items by reportable segment and a description of its composition. The other segment items category is the difference between segment revenue less the significant expenses disclosed and each reported measure of segment profit or loss.
Require that a public entity provide all annual disclosures about a reportable segment’s profit or loss and assets currently required by Topic 280, Segment Reporting, in interim periods.
Clarify that if the CODM uses more than one measure of a segment’s profit or loss, at least one of the reported segment profit or loss measures (or the single reported measure if only one is disclosed) should be the measure that is most consistent with the measurement principles used in measuring the corresponding amounts in a public entity’s consolidated financial statements.
Require that a public entity that has a single reportable segment provide all the disclosures required by the amendments in the proposed ASU and all existing segment disclosures in Topic 280.
The amendments in the proposed ASU would apply to all public entities that are required to report segment information in accordance with Topic 280.
Investor feedback on proposed ASUs is essential to inform the Board about the costs and benefits of proposed guidance. Investors interested in providing input on this proposal can contact the FASB investor liaisons—Chandy Smith at email@example.com and Jeff Brickman at firstname.lastname@example.org—or submit comments directly through the FASB investor web portal. located at www.fasb.org/info/investors.