Analyzing Advantages of the Segment Reporting Management Approach

Question: Discuss about theAnalyzing Advantages of the Segment Reporting Management Approach. Answer: Introduction The idea behind segment reporting is never new to investors, shareholders, managers as well as other users of the Abacus Limited Companys financial statements. It was first promulgated in Australian Accounting Standard (AAS) under the old regime. It essentially circumvents another means of disclosing the financial information of the company comprehensively (Kang and Gray 2013). The information published by segment reporting give another perspective on the risks that a company, for example, Abacus Limited is facing as well as its returns as both multinational and diversified company that may otherwise never been determinable from the data aggregated (Crawford et al. 2012). For instance, if the resources of Abacus Limited were concentrated in a single given geographical region, this also, might have an impact on the decisions surrounding investment of the users of the Abacus Limited financial statements. Segment reporting concept is, thus, simple and has remained significantly unchanged over the past twenty years without limitations being consistently acknowledged when evaluating corporate reporting that have been performed (Crawford et al. 2012). The most significant improvement recognized include the disclosure of the segment information in the provisional financial report and additional information regarding segments (Pisano and Landriani 2012). It has improved increased number of segments for certain enterprises. It has also focused on segmentation which aligns to internal management report as well as the consistency of segment information with other sections of the annual report. One of the major advantage segment reporting to Abacus Limited is that it will allow them to highlight the performance of the various sections. The users of the entitys financial information will, therefore, be enabled to predict the future firm's profitability better, particularly when segments are remaining involved in diverse activities as in the case of Abacus Limited (Pisano and Landriani 2012). As believed by AASB 8, the adoption of segment reporting management approach is a recipe for improved financial reporting. For example, it will permit users of the Abacus Limiteds financial statement to undertake a review of the companys operations via the eyes of management. Furthermore, since the information is already utilized internally by the Abacus Limited management, preparers will only incur few costs while since the information will remain available on a timely manner. This implies that the temporary reporting of the segment information of the company is extendable beyond the existing requirements (Crawford et al. 2012). The AASB 8 also depends on the method an organization recognizes its operating segments unlike the previous AASB 4 that imposed a given basis of segment recognition upon the Abacus Limited, hence an advantage to the firm (Nichols, Street and Cereola 2012). The firm will only be required by AASB 8 to identify its operating segment based on its internal reports which are frequently reviewed by Abacus Limiteds chief operating decision maker to allocate resources to the segment as well as assess its performance. Segment reporting is, therefore, advantageous over consolidated financial statement since enabled Abacus Limited meet the requirement to consolidate all entities controlled by the firm by availing the critically needed segment data (Crawford et al. 2012). References Crawford, L., Extance, H., Helliar, C. and Power, D., 2012. Operating segments: The usefulness of IFRS 8. Edinburgh: ICAS. Kang, H. and Gray, S.J., 2013. Segment reporting practices in Australia: Has IFRS 8 made a difference?. Australian Accounting Review, 23(3), pp.232-243. Nichols, N.B., Street, D.L. and Cereola, S.J., 2012. An analysis of the impact of adopting IFRS 8 on the segment disclosures of European blue chip companies. Journal of International Accounting, Auditing and Taxation, 21(2), pp.79-105. Pisano, S. and Landriani, L., 2012. The determinants of segment disclosure: an empirical analysis on Italian listed companies. Financial reporting.