The SEC staff frequently questions how registrants have identified operating segments and aggregated them into reportable segments, often due to events reported by companies in press releases or Form 8-K disclosures. The SEC staff may expect to see changes in segments when the company has disclosed significant acquisitions or dispositions, changes in organizational structure, or changes in key personnel. The SEC staff may also consider other disclosures made by companies on their websites or on earnings calls when commenting about segments. To resolve segment questions, the SEC staff may request a copy of the reporting package or other documents utilized by the chief operating decision maker to evaluate the support for management’s reporting conclusions.

The SEC staff has also commented on segment profit or loss measures. For example, the staff has reminded registrants to use only one measure of segment profit or loss, and has noted that use of the subtotal of a reportable segment’s measure of profit or loss outside of the ASC 280 required reconciliation constitutes a non-GAAP measure. The SEC staff clarified this position at the December 2022 AICPA/SEC Conference, noting that financial information (e.g., segment profit or loss for each reportable segment) that must be disclosed under GAAP is not a non-GAAP measure. Disclosure of total segment profit or loss on a consolidated basis outside of the financial statements (e.g., in MD&A), however, would be considered a non-GAAP disclosure that should comply with the SEC’s non-GAAP guidance.

The lack of entity-wide information required to be disclosed under ASC 280 has also been highlighted by the SEC staff. Specifically, the SEC staff has focused on the required disclosures of: