International Comparison And Reference Of Divisional Information Disclosure System

With the integration of the world economy, the scope of activities of enterprises is no longer limited by national and regional constraints, and a large number of enterprises have become cross industry and cross regional business groups.

Although the consolidated financial statements can reflect the economic resources directly or indirectly controlled by the parent company and the overall financial situation of the whole enterprise group and the overall picture of the business results, there are still limitations in meeting the goal of "serving the needs of users of information".

For the deficiencies of consolidated statements, the international solution is to disclose segment information and make it a supplement to consolidated statements.

In order to regulate the disclosure of divisional information, every accounting standard making body, securities management department and relevant international organizations have issued guidelines or systems in order to stipulate the scope of application, standard and quantity of segment information, contents of segment information, reporting period and disclosure mode.

International Comparison of divisional information disclosure system 1..

In 1969, the securities and Exchange Commission (SEC) first requested the listed companies to disclose relevant information in accordance with the industry segment. In 1976, the financial accounting standards board (FASB) issued the FASB-14 "enterprise segment financial report". Subsequently, FASB issued a series of accounting standards and technical announcements related to segment information, such as FASB-18, FASB-21 and FASB-24.

These guidelines provide a normative guide for the disclosure of enterprise segment information.

According to the above guidelines, the scope of disclosing segment information is limited to publicly held listed companies.

Enterprises should be divided into four categories according to industry, main customers, foreign business and export sales.

The criteria for reporting the industry segments are: Division's operating income, operating profit (or loss) and identifiable assets account for 10% of the consolidated business income, combined operating profit (or loss) and combined identifiable assets.

The main customer segment criteria are: its operating income accounts for 10% or more of consolidated operating income.

The standard of judging foreign business and export sales division is that its operating income accounts for 10% or more of the combined operating income, or the assets account for 10% or more of the total assets of the consolidated assets.

In addition, the number of branches is restricted, requiring all reported segments to come from non related customers' consolidated operating income, which should account for 75% of the consolidated business income of all sectors, but the maximum number of segments to be reported should not exceed 10.

The divisional information required to disclose is: industry segments should disclose income, profitability, identifiable assets and other information; foreign businesses should disclose their income.

Information on profit and loss and identifiable assets shall be operated; export sales shall be disclosed according to the total amount of the region's sales revenue from the parent country to the foreign non affiliate enterprise customers; the main customers shall disclose their sales situation one by one.

For the reporting period of the segment, the FASB - 18 issued in 1977 stipulates that enterprises do not have to provide segment information in the interim financial report; and the Special Committee on financial reporting of the American Institute of Certified Public Accountants established in April 1991, after research, believes that the segment information should be included in the interim report, and it is suggested that segment information be provided quarterly.

The way of disclosing segment information is to separate separate reports and incorporate them into an enterprise financial statement system, thus forming an integral part of the complete set of reports.

The International Accounting Standards Committee (IASC) released the IAS - 14 "financial information by segment" in 1981, and revised it in 1997. The 2. International Accounting Standards Committee (IASC) issued the International Accounting Standards Committee (IASC).

Judging from the contents of the guidelines, IAS - 14 is closer to the requirements of FASB - 14 in the United States. The difference is that it only requires enterprises to disclose industry and regional segment information, and does not require disclosure of segment information of export sales and main customers.

If an enterprise applies both industry segments and regional branches, one of them should be considered as the first level and the other as the second level foundation.

Accordingly, it is required to make full disclosure of the first division. The indicators to be disclosed include sales revenue or other business income, results, the value of the assets used, the liabilities, the total cost of the current purchase assets, the total number of assets depreciation and amortization expenses, the total amount of other important non cash expenses and the relevant investment information.

For a limited disclosure of the second tier branches, the indicators to be disclosed include: the income from the external customers of the enterprise, the book value of the assets, and the total cost of the assets over one year.

The 3. part of our country's current divisional information disclosure system has strong demand for financial information of our enterprises.

In January 1994, the CSRC issued a first qualitative description of the information disclosure requirements of the listed companies in the content and format of the information disclosure standard and Format Standard No. second - annual report (Trial Implementation) (hereinafter referred to as "guideline No. second").

In 1995 and 1997, the guidelines were revised two times, and the requirements for segment information disclosure were greatly adjusted. The listed companies were required to disclose the sub industry data with the embryonic form of segment reports in the annual accounting reports. In January 1998, the Limited by Share Ltd accounting system promulgated by the Ministry of Finance stipulates that the scope of segment information provision includes listed and unlisted Limited by Share Ltd. Enterprises should provide segment information according to the industry and regions, and stipulate that the industry segments should be the first level basis, and the regional divisions shall be the second level basis.

Information to be disclosed includes operating income, discounts and allowances, operating costs, taxes and additional charges, loss of inventory prices, and operating expenses.

13 indexes, such as management expenses, financial expenses, operating profits or losses, total assets, net cash flow of operating activities, net cash flow of investment activities and net cash flow of fund-raising activities.

Enterprises are required to compile separate operating profit and asset tables separately and incorporate them into the financial statements system as a schedule of profit statements.

The criteria for determining the importance of a division are only required in the "guidelines No. second" to consider the size of the business results, that is, whether the income of the industry accounts for 10% of the main business income as a criterion for the disclosure of the branches. The scale of assets is not considered and the number of branches is limited.

Two suggestions on improving the information disclosure system in our country. 1., about the scope of disclosure, there is a contradiction between the "guidelines second" and the "Limited by Share Ltd accounting system" on the issue.

"Guidelines No. second" only requires listed companies to disclose segment information, while the Limited by Share Ltd accounting system requires all Limited by Share Ltd, including non-listed company, to provide segment information.

The author believes that because of the large number of financial reports and the wide range and influence of the listed companies, the monitoring power of the listed companies is obviously stronger than that of non-listed company, and the pparency of information disclosure is also higher.

Therefore, it is logical to ask listed companies to disclose segment information.

However, due to the separation of ownership from control, non-listed company is generally not as good as listed companies, so it is not mandatory to disclose segment information.

2., the division and determination of divisional standards and quantity division is the foundation of segment information disclosure.

Although subdivision information can be provided by different standards, the segment information provided by industry and region can best explain the opportunities and risks of an enterprise, so the segment information of industry and region is most concerned by users of financial reports.

Therefore, enterprises should be required to divide and determine the main standards of the branch by industry and region. Enterprises can choose according to their internal organizational structure and internal financial reporting system.

In view of the fact that most enterprises are segmental by industry, if the regional segment information of such enterprises can better reflect the opportunities and risks faced by enterprises, it is required that they disclose further intra industry regional segment information on the basis of disclosing industry segment information.

When determining the important segment of the external report, the enterprise management authorities need to make clear and specific criteria for the importance judgment.

For example, the criteria for defining the industry segments should be: the nature of the industry and the way of production organization, the intensity of technology and labor, the sales market and profitability, capital demand and investment risk; and the criteria for determining the regional division should be: the economic environment and economic development level of the region, the political and legal factors and personnel quality, exchange rate, interest rate and inflation rate, foreign exchange control and other regulations.

In addition to the above qualitative criteria, quantitative criteria should also be specified.

For small segments that do not need to report separately, similar branches can be combined to report.

In order to ensure the full disclosure of segment information and the importance of accounting information, we should limit the number of branches. If we require that the total revenue from the external customers should be 75% of the total revenue of the enterprise, the report should not exceed 10.

3. of the 13 indicators required by the current system of our country, management fees, financial expenses, operating expenses, net cash flow of investment activities and net cash flow of fund-raising activities are 5 indicators which are difficult to obtain accurate information in practical operation. It is recommended that enterprises have a right to choose, allowing them to make a choice on whether to disclose all 5 indicators according to their specific circumstances.

Relatively centralized, it is difficult to find a reasonable standard to divide management expenses, financial expenses and business expenses into various branches. If these common expenses are artificially allocated among different branches, it will deepen the subjective judgement of the division reports and affect the objectivity of the management results. Second, when the multiple industry segments of the enterprise are set up in the same accounting entity, the investment and fund-raising activities of the accounting entity may not be detailed accounting according to the industry segments. If the enterprise collects the partial information about the net cash flow of the investment and financing activities, the accounting workload and accounting cost will be increased, and the timeliness of accounting information disclosure will be increased. The reasons are: 1. The management, capital raising and sales of enterprise groups.

4. during the reporting period, the company took into account the need for users to update information in financial reports. In order to enable long-term investors in the securities market to keep abreast of the opportunities and risks faced by enterprises and predict the long-term trend of enterprises, it is recommended that listed companies not only disclose segment information in the annual report, but also in the interim report.

Of course, considering the differences in the time and importance of the interim report and the annual report, the disclosure of segmental information in the interim report should be simplified, which can mainly provide information on operating income, operating costs, operating profits or losses, and total assets.