Regulatory updates

Investors, lenders, creditors, and other allocators of capital (collectively, “investors”) have observed that segment information is 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.

While investors are supporting the management approach to segment reporting, few investors required more segment information to be reported⁹ Investors 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. .

Accordingly, in 2017, the Financial Accounting Standards Board (FASB) undertook a project to improve segment disclosures.

In November 2023, the FASB issued a final Accounting Standards Update (ASU) which prescribes improvements to a public entity’s reportable segment disclosures and addresses requests from investors for additional, more detailed information about a reportable segment’s expenses.

The amendments in the ASU improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. The key amendments are:

• A public entity should 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
• A public entity should disclose, on an annual and interim basis, an amount for other segment items¹⁰The other segment items category is the difference between segment revenue less the significant expenses disclosed and each reported measure of segment profit or loss. by reportable segment and a description of its composition
• A public entity must provide all annual disclosures about a reportable segment’s profit or loss and assets currently required by the FASB Accounting Standards Codification Topic 280, Segment Reporting, in interim periods
• Clarify that if the CODM uses more than one measure of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources, a public entity may report one or more of those additional measures of segment profit. However, 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 the public entity’s consolidated financial statements
• A public entity needs to disclose the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources
• Requires that a public entity which has a single reportable segment should provide all the disclosures required by the amendments in the ASU and all existing segment disclosures in Topic 280.

The ASU would be applicable to all public entities that are required to report segment information in accordance with Topic 280. All public entities would be required to report segment information in accordance with the new guidance starting in annual periods beginning after 15 December 2023 .

To access the text of the ASU, please click here