Volume 6, No. 11

 

On The Way In 1998, Part Two: New & Improved Segment Reporting:  Two new FASB statements will become effective in 1998 for calendar year companies: one is SFAS No. 130, which governs the reporting of comprehensive income, and reviewed in Part One. The other is SFAS No. 131, which is a rewrite of the rules governing the way companies report information about the "segments" of their operations. For years, analysts have been carping about the general poor quality of segment information in the reporting of U.S. Common complaints include too few segments, too few details about segments and the lack of segment reporting during a company's fiscal year. SFAS No. 131 will go a long way toward remedying those problems, by employing a radically different yet simple idea behind the way the reported information is to be gathered. Whereas the old accounting required companies to slice and dice their data to fit within the prescriptions of an accounting standard, SFAS No. 131 requires companies to present segment information on the same basis employed by management in their own review of segment performance. This makes it easier for companies to prepare such information, and makes it possible for segment information to be presented on a quarterly basis. The downside: such information will make comparability between companies almost nil - and a devious management will also have a ticket to show only what they want to show in the financial statements.

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