NEWS RELEASE 03/06/13
FASB Responds to Financial Accounting Foundation’s Post-Implementation Review Report on Statement 131 on Segment ReportingNorwalk, CT, March 6, 2013—The Financial Accounting Standards Board (FASB) will review the issues raised by the Post-Implementation Review of its business segment reporting standard with its stakeholders and the staff of the U.S. Securities and Exchange Commission to determine whether further review of the standard is warranted, the Board said today.
The announcement came in the FASB’s response to the Financial Accounting Foundation’s (FAF) Post-Implementation Review (PIR) report on FASB Statement No. 131, Disclosures about Segments of an Enterprise and Related Information (codified in Accounting Standards Codification Topic 280, Segment Reporting), which addresses the way public companies report financial information about their business segments.
“The FASB welcomes the overall conclusion in the PIR report that Statement 131 is working effectively and is providing more information about an organization’s business activities than the prior segment reporting standard and enhancing the relevance of segment disclosures,” said FASB Chairman Leslie F. Seidman. “The report’s findings indicate that some stakeholders believe certain operational aspects could be improved with additional guidance.”
“Therefore, the FASB will consult with stakeholders to understand the significance of the issues raised and their priority in relation to other potential agenda items. We will also meet with representatives of the U.S. Securities and Exchange Commission and the International Accounting Standards Board (IASB) in response to the report’s findings and will report back to the FAF Trustees and the FAF’s Oversight Committee as progress is made,” Seidman added.
In its response, the FASB noted that the PIR report findings affirm that segment information is better aligned with an organization’s internal structure and is more consistent with financial information reported outside the financial statements, which enables investors and users to better understand an organization’s activities and prospects for future growth.
Additionally, the report commented that some preparers and practitioners would find additional guidance on certain operational aspects of Statement 131 to be helpful, and that some users would like additional and comparable information to be presented by segment.
The IASB is also conducting a PIR of IFRS 8, Operating Segments, which is substantially converged with Statement 131. The IASB staff has presented and discussed the preliminary results from their PIR outreach at the January 2013 IASB meeting. The FASB believes that any plan to undertake a separate project to review or amend Statement 131 as a result of the PIRs should be coordinated with the IASB to maintain a converged approach to segment reporting.
The FASB’s full response to the Statement 131 PIR report is available on the FASB website.
The FASB issued Statement 131 in 1997 to improve the way public companies report financial information about their business segments. Statement 131 establishes standards for the way that public companies report information about operating segments in annual and interim financial statements. It also establishes standards for related disclosures about products and services, geographic areas, and major customers. The Statement does not apply to private companies or to not-for-profit organizations.
This is the second Post-Implementation Review of a FASB standard, as the team completed its first review of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48) (codified in Accounting Standards Codification Topic 740, Incomes Taxes), in January 2012. More information on the FAF’s PIR process can be found on the FAF website.
The PIR process, which is independent of the standard-setting process of the FASB and the Governmental Accounting Standards Board (GASB), is intended to assist the FAF’s Board of Trustees with its ongoing efforts to evaluate the effectiveness of the standard-setting process for both organizations. The FAF Trustees’ oversight responsibility does not extend to recommending standard-setting action, which is the sole, independent responsibility of the FASB and the GASB.
About the Financial Accounting Foundation
The FAF is responsible for the oversight, administration, and finances of both the Financial Accounting Standards Board (FASB) and its counterpart for state and local government, the Governmental Accounting Standards Board (GASB). The Foundation is also responsible for selecting the members of both Boards and their respective Advisory Councils.
About the Financial Accounting Standards Board
Since 1973, the Financial Accounting Standards Board has been the designated organization in the private sector for establishing standards of financial accounting and reporting. Those standards govern the preparation of financial reports and are officially recognized as authoritative by the Securities and Exchange Commission and the American Institute of Certified Public Accountants. Such standards are essential to the efficient functioning of the economy because investors, creditors, auditors, and others rely on credible, transparent, and comparable financial information. For more information about the FASB, visit our website at www.fasb.org.