ASC 280 utilizes the “management approach,” whereby external segment reporting is aligned with management’s internal reporting. This approach is intended to provide financial statement users with an ability to see a reporting entity “through the eyes of management.”
Reporting entities should apply the following steps when applying ASC 280:
  • Step 1: Identify operating segments
  • Step 2: Aggregate operating segments, if applicable, into reportable segments
  • Step 3: Determine if reportable segments cover a sufficient amount of the reporting entity’s operations
  • Step 4: Determine if additional entity-wide disclosures are necessary

Figure FSP 25-1 depicts how these four steps are applied in determining reportable segments.
Figure FSP 25-1
Steps for determining reportable segments
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