SEC staff clarifies segment reporting disclosures
Hot Topic | November 2024
SEC staff remarks on multiple segment performance measures and elaborates on single reportable segment entities.
Specialists from our Department of Professional Practice summarize remarks from the SEC staff on the interplay between ASC 280 and the SEC’s non-GAAP rules and regulations. Additionally, the SEC staff clarified remarks made at the 2023 AICPA & CIMA Conference on current SEC and PCAOB Developments regarding multiple segment performance measures and single reportable segment entities.
Applicability
- Public entities (as defined by ASC 280)
Relevant dates
- November 27, 2023 - FASB issues ASU 2023-07
- ASU 2023-07 is effective for public entities fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted.
Key impacts
The SEC staff clarified the following in recent comments:
- The SEC staff’s view is that ASU 2023-07 does not require or expressly permit disclosure of specific additional segment performance measures. These additional measures must comply with Regulation G and Item 10(e) of Regulation S-K in that they cannot be misleading measures and the required non-GAAP disclosures must be provided.
- Auditors are responsible for determining whether additional measures of segment profit or loss included in the notes to the financial statements are presented in conformity with ASC 280. The determination of whether the additional measures comply with Regulation G and Item 10(e) of Regulation S-K is not within the scope of the audit opinion covering the US GAAP financial statements.
- The SEC staff continues to expect that the required performance measure for single reportable segment entities managed on a consolidated basis would be consolidated net income.
- Although ASC 280 does not require a significant segment expense to be calculated in accordance with US GAAP, the SEC staff expects robust and transparent disclosure of non-GAAP significant segment expenses, including a clear labelling of the expense.
Report contents
- The issue
- Background
- Interplay between ASC 280 and SEC non-GAAP financial measures regulations
- Single reportable segment entities
- Other issues
- Effective date and transition requirements (ASU 2023-07)
- KPMG resources
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