Dana Hollie


In 2014, segment reporting gained third place in SEC comment letters. This article reviews the history of the segment reporting including the segment reporting choices and segment reconciliations, the current concerns as the level of detail in segment disclosures varies widely across organizations, the value relevance of segment reconciliations and its market consequences, and the importance of segment reporting to management. The following are highlights of the manuscript:

The third-most-common area discussed in SEC comment letters: segment reporting.

  • The application of SFAS131: the whole may not equal the sum of its parts.
  • The level of detail in segment disclosures varies widely across organizations.
  • Segment reconciliation adds value to consolidated earnings.
  • Segment reconciliation can have significant market consequences.
  • Additional guidance on segment reporting may be beneficial and necessary in the future.

Full Text:



Albrecht, W. D., &Chipalkatti, N. (1998).New segment reporting.CPA Journal, 68 (5).

Alfonso, E., Hollie, D.,& Yu, S. (2012). Manager’s segment financial reporting choice: an analysis of firms’ segment reconciliations. Journal of Applied Business Research, 28(6), 1413-1444.

American Institute of Certified Public Accountants (AICPA). (1994). Improving Business Reporting—A Customer Focus. Report of the AICPA Special Committee on Financial Reporting. New York. NY: AICPA.

Association for Investment Management and Research (AIMR), Financial Accounting Policy Committee. (1993). Financial Reporting in the 1990s and Beyond: A Position Paper of the Association for Investment Management and Research. Prepared by Peter H. Knutson. Charlottesville, VA: AIMR.

Basu, S., Hwang, L., & Jan, C. (2001). Differences in conservatism between big eight and non-big eight auditors. Available at SSRN: http://ssrn.com/abstract=2428836 or http://dx.doi.org/10.2139/ssrn.2428836

Berger, P. G., & Hann, R. (2003).The impact of SFAS No. 131 on information and monitoring. Journal of Accounting Research, 41(2), 163-223.

Botosan, C. A., & Stanford, M. (2005).Managers' motives to withhold segment disclosures and the effect of SFAS No. 131 on analysts' information environment. The Accounting Review, 80(3), 751-772.

Choi, J.H., J-B.Kim, X. Liu, & D. A. Simunic. (2008). Audit pricing, legal liability regimes, and big 4 premiums: theory and cross-country evidence. Contemporary Accounting Research, 25(2), 55–100.

Collins, D., Maydew, E., &Weiss, I. (1997). Changes in the value-relevance of earnings and nook values over the past forty years.Journal of Accounting and Economics, 24 (1), 39–68.

DeFond, M. L., and K. R. Subramanyam. (1998). Auditor changes and discretionary accruals, Journal of Accounting and Economics, 25, 35-67.

Financial Accounting Standards Board (FASB). (1976). Financial Reporting for Segments of a Business Enterprise.Statement of Financial Accounting Standards No. 14. Stamford, CT: FASB.

——. (1978). Objectives of Financial Reporting by Business Enterprises.Statement of Financial Accounting Concepts No. 1. Stamford, CT: FASB.

——. (1997). Disclosures about Segments of an Enterprise and Related Information.Statement of Financial Accounting Standards No. 131. Norwalk, CT: FASB.

Francis, J. R., and D. Wang. (2004). Investor protection and auditor conservatism: are big 4 auditors conservative only in the United States? Working paper: University of Missouri.

Hayn, C. (1995). The information content of losses.Journal of Accounting and Economics, 20, 125-153.

International Accounting Standards Board (IASB). (2006). Operating Segments. International Financial Reporting Standard 8.

Hollie, D. and S. Yu. (2012). Do reconciliations of segment earnings affect stock prices? Journal of Applied Business Research, 28(5), 1085-1106.

Morgan, N., &Feldman, J. (2014). No more Mr. Nice Guys: SEC sharpens talons for 2014. http://ww2.cfo.com/regulation/2014/01/mr-nice-guys-sec-sharpens-talons-2014/

Nichols, L. M., & Gallun, R. A. (1998).Coping with the New Segment Standard.CPA Journal, 68(4), 54-55.

Reason, T. (2001). Picking apart the pieces. CFO Magazine.

Reynolds, J. K., & J. R. Francis. (2000). Does size matter? The influence of large clients on office level auditor reporting decisions. Journal of Accounting and Economics, 30, 375-400.

SEC Staff Urges Comprehensive Story on Segment Reporting Decisions, AICPA Conference.(2012).http://www.bna.com/uploadedFiles/Content/Web_Forms/Real_Magnet_Form/AICPA_National_Conference/AICPA_conference_special_report.pdf

Simunic, D. A., & Stein, M.T. (1996). The impact of litigation risk on audit pricing: areview of the economics and the evidence, Auditing: A Journal of Practice and Theory, 15 Supplement, 119-134.

Thoman, L., (1996). Legal damages and auditor efforts, Contemporary Accounting Research, 13, 275-306.

DOI: https://doi.org/10.11114/afa.v1i2.816


  • There are currently no refbacks.

Paper Submission E-mail: afa@redfame.com

Applied Finance and Accounting (AFA)        

ISSN 2374-2410(Print)           ISSN 2374-2429(Online)

Copyright © Redfame Publishing Inc.

To make sure that you can receive messages from us, please add the 'redfame.com' domain to your e-mail 'safe list'. If you do not receive e-mail in your 'inbox', check your 'bulk mail' or 'junk mail' folders. If you have any questions, please contact: afa@redfame.com