Segmental Reporting
1 Introduction to segmental reporting
Segmental reporting can be seen as “the analysis of the financial information of an enterprise or group between the different business activities and/or the different geographic areas in which it operates” . The reason for this reporting division into different business activities and geographic areas is that these have different profit potentials, growth opportunities, degrees and type of risk, rates of return and capital needs. Because of these differences, it is possible that consolidated financial statements are not sufficient (these financial statements summarize the results and financial position for the reporting entity as a whole). The disclosure of information about an enterprise’s operation in different industries, its foreign operations and export sales, and its major customers, as an integral part of financial statements, may provide a solution to this problem (Thoen and Lefebvre, 2001).
2 Origin of segmental reporting
Four theorems that are characterized by an accounting or a financial background can be considered as factors that created a need for the segmentation of information. In the following paragraphs, a brief description of these theorems will be given.
2.1 The fineness-theorem
This theorem states that “given two sets containing the same information, if one is broken down more finely, it will be at least as valuable as the other set.” Applied to segmental reporting, this means that the segmented information will always contain information that is as usual and valuable as the information provided by aggregated financial statements.
2.2 Market efficiency theory
According to Fama (1970), three kinds of efficiency can be distinguished, depending on the available information: (1) weak form efficiency, (2) semi-strong form efficiency, and (3) strong form efficiency. A market is efficient in the ‘weak form’ when all past prices are reflected in today's price. A market is efficient in the ‘semi-strong form’ when prices reflect all public information. At last, a market is efficient in the ‘strong form’ when all information in a market, whether public or private, is reflected in the price.
The reporting of segmented information by companies may be useful to create more efficient markets. This is because this kind of information increases the tra...
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...on the internal corporate structure, and (4) segments for each individual market in which the company is operating. Corporations may obviously also make a combination of these dimensions. The choice of the segmentation base depends on the type of company and on should be made with the intention to optimise the entity’s financial reporting.
5.2.2.2 Difficulties related to the information to be disclosed
References
Emmanuel, C. & N. Garrod (1992). Segment reporting: International issues and evidence. Prentice Hall, ICAEW
Fama, E. (1970). Efficient capital markets: A review of theory and empirical work. Journal of finance, Vol. 25, pp. 383-417.
Flower J. & G. Ebbers (2004). Global Financial Reporting. Palgrave Basingstoke.
Mautz R.K. (1968). Financial Reporting by Diversified Companies. Financial Executives
Research Foundation, New York.
Radebaugh L.H. & S.J. Gray (1993). International Accounting and Multinational Enterprises. John Wiley & Sons (USA), 3rd edition.
Thoen V. & C. Lefebvre (2001). A critical analysis of segmental reporting based on an international perspective: a ground for better regulation. DTEW Research Report 0152, K.U.Leuven, 34 pp.
Mandated reports are a genre that is a part of numerous careers. Mandated reports are used by mandated reporters which are designate groups of professionals that are required to report cases of suspected child abuse and neglect. A mandated report has a specific way that it has to be field out because the severity of the information is a massive part in helping save an abused or neglected child from being endangered. This research analyzes the difference between the different documentations in mandating reporting and how one reports various from another. The next step is to investigate where and who the forms are turned into. I’ll be looking at the Social Worker perspective because it’s the field of study I’m going in and would potentially help me when I begin my career in children and family services. Giving the information about mandated reports would educate me on the all the factual information needed after receiving a mandate report and from the information gathered, how do they deiced whether or not it’s a serious case or not. This research would uncover every aspect from beginning to end of the entire process of when a report is submitted up until the discussion is made on what to do after reviewing the information. The report is used my any profession to report suspect child abuse or neglect at any time or place. There is a different between different careers on how the report is written depending on the person submitting it. The very last step is going in depth with analyzing the actual form and comparing and contrasting it to other forms from different states. I want to also look at, the different between the forms, depending on who is the attended audience.
Financial statement users around the globe use financial statements to evaluate the performance of companies (Fundamentals of Financial Accounting, 2006). In order to locate a company’s reported assets, liabilities, expenses and revenues, statement users rely on four types of financial statements. The four financial statements include: Balance Sheet, Income Statement, Statement of Retained Earnings, and Statement of Cash Flows (Fundamentals of Financial Accounting, 2006, p. 6). Each of these reports provides different information to the financial statement user. The Balance Sheet reports at a point in time: a company’s assets (what it owns), liabilities (what it owes) and stockholder’s equity (what is left over for the owners) (Fundamentals of Financial Accounting, 2006, p.7). The Income Statement shows whether a business made a profit (net income) during a specific period of time (Fundamentals of Financial Accounting, 2006, p. 10). The Statement of Retained Earnings illustrates what portions of the company’s earnings was paid to stockholders and retained by the company for future operations (Fundamentals of Financial Accounting, 2006, p.12). Finally, the Statement of Cash Flows reports summarizes how a business’ “operating, investing, and financial activities caused its cash balance to change over a particular range of time” (Fundamentals of Financial Accounting, 2006, p.13).
In answering the question on discussion whether it is important for stock markets to be efficient in order to fulfil its roles, it is important to discuss the roles and the functions of the stock market and why it is important for the stock market to be efficient in order to be able to operate and to perform its role as an efficient allocator of resources.. Secondly it is essential to look at the concept of capital market efficiency and what it means. Clearly, market efficiency is a concept that is controversial and attracts strong views, partly because of the differences in the way individuals explains the concept, and partly because it is believed that it determines how an investor will approach an investment. Finally discuss the types of efficiency and whether it’s only important for the stock market to be allocative efficiency in order to operate or they are other types of efficiency which also help the stock market to fulfil its roles.
Due to the use of the company’s annual report for users to make decisions, ensuring that the financial reports convince the objective of general purpose financial reporting and qualitative characteristics of useful financial information as outlined in the IASB September 2010 ‘Conceptual Framework for Financial Reporting’ (CF) have become extremely important. Such failure of disclosures can mislead information on the company’s financial statements.
According to the conceptual framework, the potential users of financial statements are investors, creditors, suppliers, employees, customers, governments and agencies, and the general public (Financial Accounting Standards Board, 2006). The primary users are investors, creditors, and those who advise them. It goes on to define the criteria that make up each potential user, as well as, the limitations of financial reporting. The FASB explicitly states that financial reporting is “but one source of information needed by those who make investment, credit, and similar resource allocation decisions. Users also need to consider pertinent information from other sources, and be aware of the characteristics and limitations of the information in them” (Financial Accounting Standards Board, 2006). With this in mind, it is still particularly difficult to determine whom the financials should be catered towards and what level of prudence is necessary for quality judgment.
An important part of financial planning for corporations is the annual report. Publically held companies are required to submit an annual report to the SEC and private companies, even though not required, can use an annual report to gauge the performance of the company for the past year and use the report to plan for the future. The financial statements that make up an annual report are the income statement, the balance sheet, and the statement of cash flows. (Melicher, 2014) Once all of the financial information has been compiled and the three statements that make up the annual report have been completed a corporation can then start to analyze the data. There are several different categories of financial ratios
Efficient market hypothesis was developed by professor Eugene Fama at the University of Chicago Booth School Of Business as an academic concept of study through his published Ph.D. thesis in the early 1960s . Fama proposed two crucial concepts that have defined the conversation on efficient markets in his thesis. The efficient market hypothesis was the prominent theory in the 1960s, Fama published dissertation arguing for the random walk hypothesis to support his efficient market theory. “Fama demonstrated that the notion of market efficiency ...
Although the term market efficiency to economists is also a broadly known term referring to operational efficiency, this paper concentrates on the efficiency of stock markets or to be more precise the informational efficiency of the stock market. Fama stated that in an efficient market the prices of stocks reflect all available information at any given time. His conclusion due to that fact is that it is not possible to outperform the market by selection.
Although not particularly in an integrated format, Amcor’s reports have extensive detail to the core content elements of i0ntegrated reporting. Through two reports, they address the six capitals of Integrated reporting which are Financial, Manufactured, Intellectual, Human, Social Relationship and Environmental Capitals.
...t Efficiency and Stock Market Predictability" [Online] Available On: http://www.e-m-h.org/Pesa03.pdf [Accessed On 5 december, 2011].
The concept of 'efficient market hypothesis' was introduced by Eugene Fama in mid-1960s. According to this concept, the powerful struggle in the capital market leads to reasonable valuing of debt and equity securities. The perception is based on the replication of related evidence in market prices of the securities. If only past information is reflected in 'weak-from efficient markets; past as well as present information is reflected in 'semi-strong form efficient markets'; past, present, and future information is reflected in 'strong-form efficient markets'.
Rittenberg, Larry, Bradley Schwieger, and Karla Johnstone. Auditing. 6th ed. Mason: Thomas South-Western, 2005. 10-40.
Efficient Market Theory (EMT) is based on the premise that, given the efficiency of information technology and market dynamics, the value of the normal investment stock at any given time accurately reflects the real value of that stock. The price for a stock reflects its actual underlying value, financial managers cannot time stock and bond sales to take advantage of "insider" information, sales of stocks and bonds will not depress prices, and companies cannot "cook the books" to artificially manipulate stock and bond prices. However, information technology and market dynamics are based upon the workings of ordinary people and diverse organizations, neither of which are arguably efficient nor consistent. Therefore, we have the basic contradiction of EMT: How can a theory based on objective mechanical efficiency hold up when applied to subjective human inefficiency?
The basic theory describes the information efficiency of the market is the Efficient Markets Hypothesis (EMH). The information efficiently is classified according to how fast and accurate security prices react to new information, in such a way that nobody be able to get abnormal return. All information can be divided into three types: past information, public available information and all information. In accordance with the Fama’s c...
Since the originative works of Fama (1965 and 1970), where an efficient market from the informational execution point of view was defined as one where “stock prices ‘fully reflect’ all available information” (Fama 1970) and market efficiency was categorized into three levels: weak-form, semi-strong form and strong-form. First of all, the information set through weak form efficiency, reflects only the historical prices or returns. Second of all, the information set in semi-strong form efficiency, contains information available to all market participants. Lastly, in strong form efficiency, the information set consists of all information available to any market participant.