The Accounting Staff of the SEC's Division of Corporation Finance, in its updated document, Current Accounting and Disclosure Issues in the Division of Corporation Finance, identified compliance with segment disclosure requirements as being a “significant focus of staff reviews.”1 The Staff emphasized certain matters that have arisen as a result of those reviews and communicated the level of scrutiny that they will be applying to registrants' filings.
The chief operating decision maker (CODM) is not necessarily a single person. Rather, it is to be considered a function that may be carried out be several persons.
The Staff may challenge registrants' exclusion of components of the business from being considered operating segments when the CODM receives reports of that component's operating results on a quarterly or more frequent basis. In some cases, the Staff requested copies of all reports furnished to the CODM and reviewed internal documentation for its consistency with public statements made by members of the management and related press coverage. The Staff pointed out that there may be mitigating circumstances whereby the CODM receives reports on overlapping sets of components that are more representative of the way the reporting entity is managed.
As discussed later in this chapter, the Staff believes the aggregation of segments is a “high hurdle” and is appropriate only in situations when the user's understanding of the reporting entity's results and future ...