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FASB improves segment disclosures

Segment reporting has consistently been a hot topic for financial statement preparers, auditors, investors and the SEC ever since the FASB first issued guidance on the subject in 1997. That guidance (codified in ASC 280) is designed to provide financial statement users with granular information through the ‘eyes of management� about a public entity’s business performance.

Despite the FASB’s efforts, the SEC staff has expressed concerns for several years about a lack of compliance. Specifically, the SEC’s concerns are that too few segments are being disclosed and not all required information about reported segments is being presented.

Accounting Standards Update (ASU) 2023-07 marks a response by the FASB to user requests to improve segment reporting, notably requiring disclosure of significant segment expenses and increasing the frequency of segment reporting to interim periods. Calendar-year entities will begin applying many of its provisions in 2024, with the interim-period provisions taking effect in 2025.

ASC 280 remains challenging to apply because an entity’s internal organizational structure dictates how segment information is compiled and presented.

This Handbook discusses these challenges and explains the principles of ASC 280, as amended by ASU 2023-07, through extensive interpretive guidance, examples and observations.