Segment reporting: The Financial Accounting Standards Board (FASB) now requires that companies in the United States include segmented financial and other data in their annual reports and that the segmented reports prepared for external users must be the same methods and definitions that the companies use in internal segmented reports that are prepared to aid in making operating decisions. This is a very unusual requirement. Companies are not ordinarily required to report the same data to external users that are reported internally for decision-making purposes.
Business segment reporting breaks out a company’s financial data by company divisions, subsidiaries, or other segments. Segment Reporting is projected to give information to investors and creditors concerning the financial results and situation of the most vital operating units of a company, which they can use as the basis for decisions allied to the company. Thus, it is quite important that segmented data be prepared in ways that facilitate thoughtful and correct decisions.