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Segment Disclosure Updates – Single Reportable Segment

In November 2023, the Financial Accounting Standards Board (FASB) issued an Accounting Standards Update (ASU 2023-07) with the goal of enhancing segment disclosures under Topic 280 – Segment Reporting. This Update is applicable for all public entities.

The new ASU clarifies that all public entities with a single reportable segment are required to provide all the disclosures required by the standard. Under the current accounting guidance, there are no explicit requirements for companies with a single reportable segment to include segment disclosures within the financial statements. Therefore, companies with a single reportable segment typically have only provided disclosures required by the guidance related to entity-wide disclosures (i.e. customer concentration disclosures). This ASU now clarifies, which will result in more consistency in practice, and requires that companies with one reportable segment expand segment disclosures to provide all applicable disclosures as required by companies with multiple segments. Further, companies that identify one reportable segment need to consider whether any portions of the segment exclude certain functional departments or a corporate headquarters. Therefore, the segment disclosures may differ from consolidated totals. In these instances, companies may include an “other” segment to reconcile back to consolidated totals.

Companies are still required to include segment disclosures, which include the company’s measure(s) of segment profit or loss that the Chief Operating Decision Maker (“CODM”) considered in determining how to allocate resources and assess segment performance. Under the new guidance, a company is now permitted to include additional performance measures that the CODM utilized to assess performance; however, if the profit and loss metric is not a consolidated Generally Accepted Accounting Principles (“GAAP”) measure, companies are still required to reconcile the non-GAAP measure to the closest GAAP measure within a company’s segment disclosures. Furthermore, these performance measures should be evident from internal management reports regularly provided to and reviewed by the CODM. If a company has a single reportable segment, we have seen the SEC expectation that the company reconciles the performance measure to consolidated net income. 

ASU 280-10-55-55 provides an illustration for presenting information about reportable segment revenue, profit or loss, and the new required significant segment expenses for a company with one reportable segment: 

The amendments in this Update are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. A public entity should apply the amendments in this Update retrospectively to all prior periods presented in the financial statements.

The SEC has historically focused on a company’s segment disclosures, which are heavily scrutinized and subject to comment letters. Therefore, given the new guidance, we expect an increased focus on segment disclosures, particularly those with one reportable segment. 

How Centri Can Help

• Serving as the central point of contact for the working group, ensuring that responsibilities are clearly defined and critical deadlines are met.
• Developing/enhancing internal controls over developing control activities over how the CODM determines measures of segment profit or loss in allocating resources and assessing performance, and if applicable, on how such Non-GAAP measures are reconciled back to consolidated GAAP measures. 
• Enhancing existing segment documentation in a memorandum to align with the new ASU, or if one has not been previously prepared, preparing a memorandum of how the company complies with ASC 280, including the adoption of this Update.
• Assisting with the preparation of the segment footnote and its related required disclosures in the financial statements.

At Centri, our team of technical accounting experts has the knowledge and expertise to help your business navigate the new requirements. Contact us to learn more.

Blake Roberts

Partner | Technical Accounting Practice Leader | CPA

Blake is a Partner at Centri Business Consulting and the leader of the firm’s Technical Accounting Practice. He has more than 18 years of public accounting experience. View Blake Roberts's Full Bio

Michael Kirchner

Managing Director | CPA, MBA

Mike is a Managing Director at Centri Business Consulting. He has more than 16 years of accounting, advisory, and audit experience. View Michael Kirchner's Full Bio