Explore BrainMass
Share

SFAS 131 on defining segments for financial reporting

This content was STOLEN from BrainMass.com - View the original, and get the already-completed solution here!

DOES IBM REALLY HAVE ONLY ONE INDUSTRY SEGMENT?

Not all corporations have readily embraced segment reporting. All disclosure has a cost; gathering and monitoring information for each segment are not cheap. In addition, some companies fear that such data could be useful to their competitors. One solution is to define the company as having only one segment so that disaggregation is not required. With the very flexible guidelines established in SFAS 14 for identifying segments, many companies were able to avoid presenting segment information in this manner.

Consider IBM. As befits its size, the $63 billion (estimated 1989 sales) computer company is in several lines of business, including personal computers, mainframes, electronic mail systems and semiconductors (IBM's semiconductor facilities rank among the world's largest). How is each of these segments doing? That's hard to say. IBM reports figures for a grand total of one segment, called "information-processing systems, software, communications systems and other products and services."...

Does anybody care? They should. Says Eugene Glazer, technology analyst at Dean Witter Reynolds: "Investors need to know how a company is doing in each major business. Maybe one business is so dominant and earning such huge profits that it's masking errors in other businesses."11 To be fair, although under SFAS 14 IBM indicated that a single segment "represents more than 90 percent of consolidated revenue, operating profit, and identifiable assets," it nevertheless voluntarily disaggregated revenues "by classes of similar products or services within the information technology segment." However, data on operating profit, assets, depreciation, and capital expenditures were not similarly disaggregated.

Should the FASB have tightened up its rules with SFAS 131 on defining segments to ensure that all companies present appropriately disaggregated information? Why or why not?

© BrainMass Inc. brainmass.com October 16, 2018, 7:06 pm ad1c9bdddf
https://brainmass.com/business/segment-reporting/sfas-131-on-defining-segments-for-financial-reporting-105336

Solution Preview

I concur, and following is why:

1. These are public companies for which full disclosure is expected. If companies didn't wish to disclose financial details, they probably shouldn't be public. Our society is not a ...

Solution Summary

Should the FASB have tightened up its rules with SFAS 131 on defining segments to ensure that all companies present appropriately disaggregated information?

$2.19
Similar Posting

Explain operating segments of an enterprise.s SFAS No. 131 define an operating segment

Playing devil's advocate could you just not prepare financial information? Wouldn't it be advantageous to a company to not segregate the information with the hopes of maintaining a competitive advantage? Please explain

if Pepsi is launching a new water product but they are in the infant stages of doing so wouldn't it be to their advantage of not preparing separate financials so that Coca-Cola doesn't jump in and perhaps steal their business? please explain

Why couldn't a company like Pepsi not make their new water product a segment of the company? What if the new water product was part grouped with their normal business? Or what if management grouped the new water product in with all of their new products?

View Full Posting Details