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Disclosure concerns rising

THE Australian Securities and Investments Commission has highlighted a number of disclosure deficiencies related to segment reporting.

Diversified companies are required to disclose segment information so users of financial reports can understand a company’s operations and segment-related risks and returns.

Deficiencies found include:

• Grouping business or geographic activities subject to different risks into the one segment. For example, some mining companies did not provide segment information despite producing different commodities with substantially different risks and returns;

• Primary segment information not correctly reported. A company’s primary segment must be one that predominantly affects that company’s risks and returns. Some companies reported primary segment information using a mix of business and geographic segments instead; and

• Geographical or business segment information not disclosed or incomplete. Some companies omitted information such as segment assets, revenue, results, liabilities or expenses, information on the types of products and services included in each segment and the composition of each geographical segment.

Also, some companies reporting revenue for a primary geographical segment based on asset location did not disclose segment revenue information based on the geographical location of their customers.

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