December 20, 2022
Ms. Hillary H. Salo
Technical Director
File Reference No. 2022-ED100
Financial Accounting Standards Board
801 Main Avenue
P.O. Box 5116
Norwalk, CT 06856-5116
Sent via email to [email protected].
Proposed Accounting Standards Update, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (File Reference No. 2022-ED100)
Dear Ms. Salo:
The Virginia Society of CPAs (VSCPA) Accounting & Auditing Advisory Committee (Committee) has reviewed the Proposed Accounting Standards Update (ASU) Segment Reporting (Topic 280) issued by the Financial Accounting Standards Board (FASB). The VSCPA is a leading professional association dedicated to enhancing the success of all CPAs and their profession by communicating information and vision, promoting professionalism, and advocating members’ interests. The VSCPA membership consists of more than 13,000 individual members who actively work in public accounting, private industry, government, and education.
The Committee supports the FASB’s efforts to seek input from all stakeholders on how to improve segment reporting disclosures and promote high-quality financial reporting for public entities. We believe that input from financial statement users and preparers will be important in helping the Board achieve its objective.
We provide the following comments at macro-level for the Proposed ASU.
Multiple measures of segments’ profit or loss
The Committee supports the FASB’s efforts to clarify the guidance in Accounting Standards Codification (ASC) 280, Segment Reporting, about whether companies can report multiple measures of segment profit or loss used by the chief operating decision maker (CODM). If FASB permits multiple measures, the final guidance should use the explicit language in the proposal.
If only a single measure of segment profit or loss should be reported, the guidance should explicitly state that companies can only report the measure that is most consistent with the measurement principles used for preparing the consolidated financial statements. This would prevent any inconsistencies between the FASB requirements and the SEC’s interpretation on non-GAAP measures: the disclosure of financial information that ASC 280 “requires or expressly permits” is excluded from the definition of non-GAAP financial measures.
Significant segment expense
We believe the proposed amendments that would require a public entity to disclose, by reportable segment, the significant segment expense categories and amounts are clear. As noted by FASB, the significant segment expenses would be determined by using a management approach consistent with the existing guidance in ASC 280, including the significant judgments that would require disclosure for the significant segment expenses.
Interim reporting
The proposed requirement to include in interim periods all disclosures about a reportable segment’s profit or loss and assets under ASC 280 currently only in annual periods provides consistency with the annual disclosures. The Committee is not certain if the interim period disclosures would provide incremental cost-benefit information for stakeholders. It is recommended that FASB considers the responses from public entities in taking this decision.
Retrospective application and early adoption
We agree that the proposed amendments should be applied on a retrospective basis and permit early adoption.
The VSCPA appreciates the opportunity to respond to this proposed ASU. Please direct any questions to VSCPA Vice President, Advocacy, Emily Walker at [email protected] or (804) 612-9428.
Sincerely,
George Crowell, CPA
2022–2023 Chair
VSCPA Accounting & Auditing Advisory Committee
2022–23 VSCPA Accounting & Auditing Advisory Committee
George Crowell, CPA — Chair
Zach Borgerding, CPA — Vice Chair
Scott Davis, CPA
Tamara Greear, CPA
Josh Keene, CPA
Nick Kinsler, CPA
Daniel Martin, CPA
Michael Phillips, CPA
Chris Smith-Christian, CPA
Charles Valadez, CPA
Natalya Yashina, CPA