Towards the Usefulness and Implications of Segment Reporting Standards

Abstract

The paper examines the usefulness and implications of segment reporting standards based on the review of extant literatures. Segment reporting provides information about an entity’s operations which enables users of financial reports to assess and make informed decision on the true position and performance of the business and geographical segments a diversified entity is operating. The advocacies to make companies disclose adequately segment information resulted in the issuing of various segment standards such as Statement of Financial Accounting Standards (SFAS) 14 and 131, International Accounting Standards (1AS 14) and IAS 14R and lastly International Financial Reporting Standards (IFRS) 8.The amendments to, and/ or replacement of the standards were due to the reported deficiencies and/or criticisms by users of financial statements and other stakeholders. Following the convergence project of the IASB and US FASB, the IFRS 8 which was a replica of SFAS 131 was adopted for reporting segment information. Although IFRS 8 has been found to result in increased disclosure of segment information, there are various concerns and criticisms of the standard. These concerns and criticisms are significant enough to undermine the usage of IFRS 8 and render it less relevant. Therefore the paper recommends more post implementation reviews by the IASB and academic researches into the IFRS 8 in order to address these concerns and improve the quality of segment reporting standards.