Audit of Segment Information

 

A company should disclose information (operating segment information) to enable users of its financial statements to evaluate the nature and financial effects of the business activities in which it engages and the economic environments in which it operates.

An operating segment is a component of a company:

(a)    that engages in business activities from which it may earn revenues and incur expenses.

(b)   whose operating results are regularly reviewed by the company’s chief operating managers to make decisions about resources to be allocated to the segment and assess its performance, and

(c)    for which separate financial information is available.

 

The requirements to disclose operating segment information apply to:

(a)    the separate or individual financial statements of the company

·        whose debt or equity instruments are traded in a public market.

·        that files, or is in the process of filing, its financial statements with a securities commission or other regulatory organization.

(b)   the consolidated financial statements of a group with a parent

·        whose debt or equity instruments are traded in a public market.

·        that files, or is in the process of filing, the consolidated financial statements with a securities commission or other regulatory organization.

A company should disclose following matters relating to the segment information:

·        factors used to identify the company’s reportable segments

·        the judgements made by management in applying the aggregation criteria for operating segment

·        types of products and services from which each reportable segment derives its revenues.

·        Information about profit or loss, assets, and liabilities

·        Reconciliations of the reportable segments’ revenues, profit and losses, assets, liabilities to the company’s revenue, profit and losses, assets, liabilities


And in addition to the matters to be disclosed listed above the company also must disclosed (if available) such information as:

·        Information about products and services.

·        Information about geographical areas.

·        Information about major customers.

ISA 501

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