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25.2 Segment reporting—scope and relevant guidance (after ASU 2023-07)
Publication date: 31 Mar 2024
us Financial statement presentation guide
ASC 280 applies to public entities. The disclosure requirements of ASC 280 are not required for not-for-profit organizations or private companies.
ASC 280 provides the following guidance with regard to scope and the definition of a public entity.
Definition from ASC 280-10-20 Glossary
Public Entity:
A business entity or a not-for-profit entity that meets any of the following conditions:
- It has issued debt or equity securities or is a conduit bond obligor for conduit debt securities that are traded in a public market (a domestic or foreign stock exchange or an over-the-counter market, including local or regional markets).
- It is required to file financial statements with the Securities and Exchange Commission (SEC).
- It provides financial statements for the purpose of issuing any class of securities in a public market.
The guidance in this Subtopic does not apply to the following entities:
- Parent entities, subsidiaries, joint ventures, or investees accounted for by the equity method if those entities’ separate company statements also are consolidated or combined in a complete set of financial statements and both the separate company statements and the consolidated or combined statements are included in the same financial report. However, this Subtopic does apply to those entities if they are public entities and their financial statements are issued separately.
- Not-for-profit entities (regardless of whether the entity meets the definition of a public entity as defined above).
- Nonpublic entities.
ASC 280-10-50-20 confirms that all of the disclosures required in the segments guidance, including disclosing a measure of segment profit or loss (or multiple measures, if used to assess performance and decide how to allocate resources) and reporting significant segment expenses and other segment items, as well as the entity-wide disclosures described in FSP 25.7.7, apply to all public entities, including those with a single operating or reportable segment.
In certain instances, the financial statements of a private company may be included in the filing of an SEC registrant (e.g., due to SEC rules regarding significant equity method investments or acquired entities). In these situations, the private company is not required to disclose segment information in its separate financial statements because the private company itself is not required to file financial statements with the SEC.
For public entities, the proper application of ASC 280 is important for purposes of goodwill impairment testing because operating segments are the starting point for the identification of reporting units (the unit of account for goodwill impairment testing purposes). This is also true for private companies that have not elected to apply the goodwill accounting alternative in ASC 350-20, Intangibles-Goodwill and Other, or that have elected to apply the alternative but still test goodwill impairment at the reporting unit level. For additional private company segment reporting considerations, see FSP 25.9.
PwC. All rights reserved. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.
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