Segmental Reporting

2784 Words Apr 3rd, 2005 12 Pages
Index

1 Introduction to segmental reporting 2
2 Origin of segmental reporting 2
2.1 The fineness-theorem 2
2.2 Market efficiency theory 2
2.3 Agency theory 2
2.4 Accounting theory 3
3 The most important segmental reporting standards 3
3.1 International Accounting Standard 14 (IAS 14) 3
3.1.1 The International Accounting Standards Committee 3
3.1.2 The International Accounting Standards Board 4
3.1.3 IAS 14: Segment reporting 4
3.1.3.1 Objective of IAS 14 (revised) 4
3.1.3.2 Applicability of IAS 14 (revised) 4
3.1.3.3 Identification of segments 5
3.1.3.4 Information that has to be disclosed 5
3.2 SSAP 25 6
4 Comparison with local GAAP 's 6
5 Evaluation of segmental reporting 6
5.1 Advantages 6
5.2 Disadvantages 7
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Agents, for example, have the tendency to withhold information because they are afraid that competitors will take advantage of this information or because they do not want trade unions or employees to use the information to compare earning figures from different segments (Thoen & Lefebvre, 2001).
Nowadays, financial analysts look very negative toward companies that do not supply segmental information. Their bad evaluation of such companies entails a negative influence on the share values of those companies which on their turn forces the company to provide more information.
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2.4 Accounting theory
This theory states that the provision of segmented information is necessary in order to be able to judge uncertainty and to better value the company 's activities. The reason here fore, is that such information makes it possible to make profound judgments of risks and to predict future earnings in a more accurate way.

3 The most important segmental reporting standards

3.1 International Accounting Standard 14 (IAS 14)

3.1.1 The International Accounting Standards Committee

The IASC was formed in 1973 at the initiative of Henry Benson, a British chartered accountant, who was at that time head of the company that would later become PricewaterhouseCoopers.
The objectives of this committee were (Flower and Ebbers,

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