Segment disclosures under SFAS No. 131: Has business segment reporting improved?

In response to user concerns regarding segment reporting, the FASB issued SFAS No. 131, Reporting Disaggregated Information about Business Enterprise, in 1997. SFAS No. 131 became effective for fiscal years beginning on or after January 1, 1998. This research examines the segment disclosures of US Global 1000 companies for both 1997 and 1998 to ascertain the impact and effectiveness of SFAS No. 131 in practice. Specifically, this research considers whether the new requirements have resulted in a greater number of line-of-business segments for some enterprises, particularly those who claimed to operate in one LOB under SFAS No. 14, enterprises reporting more items of information about each segment, and improved consistency of segment information with other parts of the annual report. The research also addresses whether restructuring by some firms might limit the provision of additional segment information under SFAS No. 131. The findings indicate significant changes from reporting under SFAS No. 14 including increased consistency with information in the MD&A and other annual report disclosures. However, the practices of a significant minority of companies continue to give some cause for concern.