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Friday, July 27, 2007

J-GAAP: Segment Reporting

International accounting standard for segment reporting was originally set forth as IAS 14 (1981), Reporting Financial Information by Segment. IAS 14 was revised in 1997 and the title of the standard was changed as IAS 14 (revised 1997), Disclosures about Segments of an Enterprise and Related Information. Revised IAS 14 requires an entity to select either of business segments or geographic segments as primary segments, based on internal structure of the business entity. The other segments that are not selected as primary segments are named as secondary segments. For primary segments, IAS 14 requires extensive disclosures, including revenue, income, assets, liabilities, capital expenditures, depreciation expense, other non-cash expenses, and impairment loss. For secondary segments, it requires only limited disclosures.

Japanese reporting standard is rather similar to the former IAS 14 (1981). It requires public companies to disclose information about both industrial and geographic segments, regardless of how the companies are organized internally. For industrial segments, operating revenue, operating income, identifiable assets, depreciation expenses, and additions to the assets should be disclosed. For geographic segments, operating revenue, operating income, and identifiable assets should be disclosed.

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