nancial statements. Adjustments made to the internal financial information in
preparing the general purpose financial statements are not included in the segment
information.
(d) Information about Products and Services and Geographic Areas. If not provided
as part of the operating segment data, SFAS 131 also requires disclosure of enterprise
wide data based on products and services and geographic region. This includes in-
formation on revenues from each product and service or each group of similar prod-
ucts and services. Required disclosures for geographic regions include:
- Revenues from external customers (1) in the enterprise’s country of domicile
and (2) in each other country from which the operating segment derives mate-
rial revenues or for all foreign customers in total if revenues from external cus-
tomers in no individual foreign country is material. - Long-lived assets located (1) in the enterprise’s country of domicile and (2) in
each other country in which the company holds material assets or for all foreign
countries if the assets held in no individual foreign country are material.
While SFAS 14 required companies to disclose profit data by geographic region,
this information is no longer required under SFAS 131. A study of U.S. based Global
1000 companies,^9 found that SFAS 131 accordingly resulted in a loss of geographic
profit information. In 1997 under SFAS 14, 85% of the companies in the sample re-
ported geographic profit data. This declined to 15% in 1998 under SFAS 131.
On a more positive note, the study found that almost all the companies in the sam-
ple reported geographic data for the country of domicile following the issuance of
SFAS 131. Additionally, the research revealed an increase in the number of sample
companies providing country specific data (i.e. from 4% under SFAS 14 to 28%
under SFAS 131). For example, in 1997 Kellogg reported segment data for the
United States, Europe, and Other. In 1998 under SFAS 131, the company reported en-
terprise-wide data for the United States, United Kingdom, and Other. The latter find-
ing of the study is of considerable importance to financial statement users as another
study^10 suggests that country specific geographic segment data make it possible to
more accurately predict sales than do more aggregated geographic data.
In a study of U.S.-based Global 1000 and Fortune500 companies,^11 a comparison
was made of forecast errors for models utilizing SFAS 131 geographic sales data to
forecast errors for models utilizing SFAS 14 geographic sales data. Its findings indi-
cate a significant improvement in the predictive accuracy of geographic sales disclo-
sures provided under SFAS 131 and suggests this enhanced predictability may be as-
sociated with the revised requirements that companies report sales for the country of
domicile and for each individually material country.
On a less positive note, research^12 also indicates that the aggregation problem has
not been fully resolved, as many U.S. companies continue to provide data based on
22.3 SEGMENTAL STANDARDS IN THE UNITED STATES 22 • 9(^9) Nichols, Street, and Gray, 2002.
(^10) Nichols, Tunnell, and Waldrup, 1996.
(^11) Behn, Nichols, and Street, 2002.
(^12) Nichols, Street, and Gray, 2002.