Segment reporting is a critical element in providing transparency to stakeholders by breaking down a company’s financial information into segments to provide a clearer picture of its performance. Several segment reporting considerations can affect public company CFOs, their accounting teams, and an organization’s audit readiness. In particular, accounting and financial reporting professionals should examine the latest principles for identifying operating and reportable segments, analyze current disclosure requirements, and understand the best approaches for reconciling entity-wide disclosures. Additionally, the Financial Accounting Standards Board (FASB) has recently issued an update to segment expense disclosure requirements, which will impact segment reporting.

Segment reporting: why it matters

The major objective of segment reporting is to provide information that helps users of financial statements better understand the enterprise’s performance and different types of business activities. Segment reporting provides insight into risks, opportunities, and the company’s overall performance. Segment information is one of the most heavily utilized by investors in their review of a company’s performance, as it provides insight into how the company is managed and allows investors to understand company performance on a more disaggregated level.