erations comprise different activities in different geographic locations with different
profitability, risk, and growth characteristics.
To the extent that the financial statements of the reporting entity do not represent
the nature of that entity’s activities worldwide in a transparent manner, there appears
to be a need for reporting disaggregated information in segmental reports so that
overall performance, risks, and future prospects can be better evaluated by investors
and other users. This chapter examines the history of segmental reporting on a global
basis and discusses current developments in segmental reporting. In addition, seg-
ment reports of several corporations are provided to illustrate alternative forms of
segmental reporting.
22.2 EVOLUTION OF SEGMENTAL DISCLOSURE STANDARDS
(a) Demand for Information. In the case of an MNC, there are a variety of forces
brought to bear on management that determine the level of disclosure that will be
provided regarding the operations of the firm. These forces, both domestic and inter-
national, are summarized in Exhibit 22.1.
Although six major groups are identified in Exhibit 22.1 that influence disclosure,
this chapter focuses on two of these groups of financial statement users: investors and
governments. After describing the needs of these different user groups, the chapter
examines the major segment reporting standards in existence today and reviews gen-
22 • 2 SEGMENTAL AND FOREIGN OPERATIONS DISCLOSURESExhibit 22.1. Multinational Corporations: Participants and Pressures for International
Harmonization.
Source: Lee H. Radebaugh and Sidney J. Gray. International Accounting and Multinational
Enterprises, 5th ed. New York: John Wiley & Sons, Inc., 2002, p. 132.