FASB, Canadians and IASC address segment reporting.

The Financial Accounting Standards Board published Statement no. 131, Disclosures about Segments of an Enterprise and Related Information, which supersedes Statement no. 14, Financial Reporting for Segments of a Business Enterprise. It is part of the FASB's consolidations project, which includes still-unreleased statements on consolidations policy and procedures and unconsolidated entities. Simultaneously, the Accounting Standards Board (AcSB) of the Canadian Institute of Chartered Accountants issued a nearly identical statement. The two boards had been working together on their pronouncements.

The International Accounting Standards Committee voted to issue its own statement, but it is not identical to the FASB/AcSB pronouncements. Rather, it is more like Statement no. 14, according to FASB Project Manager Liz Fender. The IASC statement will be available shortly.

Statement no. 131 requires disclosure about different parts of a business, according to Fender, but does not require changes in the basic income statement or balance sheet. It does change the way public companies will report information about segments in annual financial statements.

Competitive concerns

The FASB received 220 comment letters during the exposure period. "Mostly, we heard concerns about competitive harm," said Fender. "Companies were concerned that increased disclosure requirements would put them at a disadvantage with suppliers and competitors by making public what a company earned on different products." To address these complaints, the FASB added quantitative thresholds for reporting, similar to the 10% guidelines in Statement no. 14. The exposure draft would have required some companies to disclose up to 25 segments. "We also softened the aggregation criteria, allowing companies to put more segments together than was allowed in the ED," said Fender. However, the board rejected a suggested blanket provision allowing companies to not disclose any information they believed competitively harmful. "It was too hard to allow entities to choose not to disclose certain information without also allowing them to withhold segment information," she said.

The statement is applicable for annual statements for fiscal years beginning after December 15, 1997. Quarterly disclosures, which had been especially requested by analysts, are required after the first annual disclosure. "For a calendar-year company," said Fender, "the first annual disclosures is due on December 31, 1998, and then quarterly for the first quarter of 1999." Early adoption is encouraged. Copies are available from the FASB order department for $11.50 each by calling 203-847-0700, ext. 555.