Bronwyn
Mantini, a student of intermediate accounting, was heard to remark after a
class discussion on segmented reporting: "All this is very confusing to
me. First we are told that there is merit in presenting the consolidated
results and now we are told that it is better to show segmented results. I wish
they would make up their minds." Evaluate this comment.
It should be emphasized that because a company discloses
its segmented results, this does not relieve the necessity for providing
consolidated results as well. Sometimes individuals become confused because
they believe that using segmented reporting means that consolidated statements
should not be presented. There is a need to provide both types of information.
The consolidated results provide information on overall financial position and
profitability, while the segmented results provide information on the specific
details that comprise the overall results. Segmented information is needed in
part because (a) Sales and earnings of individual segments are needed to
forecast consolidated profits because of the differences among segments in
growth rate, risk, and profitability, and (b) Segmented reports disclose the
nature of a company’s businesses and the relative size of the components, which
aids in evaluating the company’s investment worth.
