and geographical segments are presented as primary segment formats with full seg-
ment disclosures on each basis, will often provide useful information if an enter-
prise’s risks and rewards are strongly affected both by differences in line of business
and the geographic areas in which it operates. A matrix form of presentation gives
information on the interrelationship of the line of business and geographic seg-
ments. Hence, within each line of business a company reports data for each geo-
graphic region. As IAS 14R allows, but does not require matrix reporting, the in-
formation is provided only on a voluntary basis. A study^30 identified very few
instances of matrix reporting in a review of the segmental reporting of IAS compa-
nies. This is unfortunate as both risk and expected return are dependent on the ex-
tent to which specific industry activities are committed to specific countries. A ma-
trix presentation provides a more accurate assessment of business prospects. This is
because the effect of changes in political, economic, or social conditions in any
country will depend on the specific lines of business conducted by the MNE in the
country concerned.
As illustrated in Exhibit 22.5, the Oerlikon-Buhrle Group utilizes matrix reporting
in its 1999 accounts. Within each of six line of business based primary segments, the
company discloses sales by region, sales by location, capital expenditures, and num-
ber of employees for five geographic regions. As of the 2002 accounts, the restruc-
tured company (now UNAXIS), continues to utilize matrix reporting. In the 2002 ac-
counts, within each of four line of business–based primary segments (Information
Technology, Surface Technology, Components and Special Systems, and Other), the
company discloses the same four items of segmental data for four geographic regions
(Japan and Asia/Pacific, Europe, North America, and Other areas).
22.8 THE FUTURE. In June 2002, the IASB announced that the Board’s new pro-
gram of technical projects would include segment reporting. The focus of the seg-
mental reporting project is to achieve convergence on a topic “on which the IASB be-
lieves that a high-quality solution is available from existing international and national
accounting standards.” Our review of the segmental reporting standards of the IASB
and its standard setting partner the FASB indicates several possible modifications to
IAS 14R and FASB Statement No. 131 that should be considered in this important
effort to converge the two standards.
The U.S. FASB should consider expanding U.S. disclosure requirements to in-
clude: (1) liabilities for operating segments and (2) operating profit for geographic
segments. Both the IASB and FASB should consider requiring the disclosure of cash
flow information and R&D for primary/operating segments. Additionally, both stan-
dard setters should further consider the merits of encouraging or requiring matrix re-
porting.
Several changes should additionally be considered in regard to geographic seg-
ments. The IASB should consider modification of the guidelines regarding identifi-
cation of geographic segments to move more in line with SFAS 131, which requires
disclosure of geographic data for the country of domicile and any country responsi-
ble for a material portion of total sales or assets. Given the number of companies that
continue to report geographic segments based on broad vague regions, both the IASB
and FASB should reconsider the advice of the American Accounting Association’s
22.8 THE FUTURE 22 • 25(^30) Street and Nichols, 2002.