SEC Focusing on Segment Reporting

By Cydney Posner

The Wall Street Journal must have sent hordes of reporters to cover the AICPA conference: here is another article reporting that the SEC is getting "serious about segment reporting." According to the article, the SEC is requesting that "more companies make changes to their segment reporting in a push to increase transparency and accuracy in financial results." In particular, the SEC "is looking more closely at how companies aggregate operating segments and how historical segment results are portrayed," e.g., how expenses may be split among different segments or whether segment reporting should have been commenced earlier.

Generally, companies are "required to report results from segments in the way that management views them. SEC staff has recently written to companies asking them to separate U.S. units from ‘Americas' segments if they are domiciled in the U.S. The staff has also asked firms to make sure they are assigning the value of goodwill assets from past acquisitions to their appropriate segments."

According to the article, segment reporting was "the third most common area discussed in SEC comment letters in the first three quarters of this year, following tax and goodwill accounting issues, according to Audit Analytics. In its regular review process, the agency addressed segment reporting issues in some 435 letters to 184 companies this year through Sept. 30, according to the firm." An SEC representative stated that the SEC expects to "continue to focus on this area."

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