LOB and Geographic Segment Disclosures: An Analysis of the Impact of IAS 14 Revised

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Journal of International Accounting, Auditing and Taxation


To better satisfy important information needs of users of financial statements, as set forth in the IASC Framework, the IASC issued IAS 14 revised (IAS 14R), Segment Reporting, in 1997. IAS 14R became effective for fiscal years beginning on or after July 1, 1998. This research examines the pre-IAS 14R and post-IAS 14R line of business (LOB) and geographic disclosures of a global sample of companies that refer to IAS to ascertain the impact and effectiveness of IAS 14R in practice. Specifically, this research considers whether the new requirements resulted in (1) a greater number of LOB segments for some enterprises, particularly those that previously claimed to operate in one LOB, (2) more meaningful, transparent geographic groupings, as opposed to the vague groupings associated with the original version of IAS 14, (3) companies reporting more items of information about each LOB and/or geographic segment, and (4) improved consistency of primary segment information with other parts of the annual report. Additionally, the research examines the extent to which IAS companies provided voluntary segment disclosures and suggests some problems associated with compliance.

The findings indicate IAS 14R resulted in a significant increase in the number of items of information disclosed for each primary and secondary segment. Additionally, the consistency of segment information with introductory annual report material increased significantly and the number of companies claiming to operate in one LOB declined significantly. On a less positive note, the results reveal that many companies continued to utilize broad, vague geographic groupings. And, a significant minority continued to report segment information on a basis inconsistent with other sections of the annual report. The research also identified several instances where it appears companies may not be fully complying with the all the new disclosure guidelines. As the IASB’s new work program includes a convergence project on segmental reporting, recommendations are made regarding possible modifications to IAS 14R.

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Copyright © 2002, Elsevier.







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