The Research On The Theory Of Segment Reporting In Financial Accounting Of China

With the trend of business merger and economic globalization, more and more business enterprises have started trans-industrial and trans-national operations so as to withstand risks and win market share. Diversified operation is undoubtedly a global trend. The advantage of consolidated financial statement is that it can fairly present the financial condition and operating results of an entity as a whole. However, it hides the different earning power and increase trend and risks in different industries and regions, the usefulness of the information based on the whole company is decreased because it is hard to satisfy the demand that finance reporting users make valid invest and loan policy. To make up the deficiency of the merger reporting, we need to disclose segment information. Reporting segment information has been an international convention. Nowadays, many countries have issued standards and systems to regulate the disclosing of segment information. FASB and IASC have thoroughly studied in this field. Segment reporting is new to our country, and the research on segment reporting is still under exploration.The thesis regards the foundation theory of segment report as the core, analyzing the problems of the exposure draft, putting forward some suggestion and opinions to perfect the exposure draft by using the experience of other countries for reference and considering the reality of our country. The author points out that " risks and returns approach" is not very suitable for the classifying of segment in our country, and suggest it should adopt "management approach" primarily and "risks and returns approach" secondarily according to the cost efficiency principle and the actual circumstance in our country; and suggest that "total business profits for all reportable segments combined is less than 75% of the total business profits, additional reportable segments should be identified until the 75% level is reached" when we decide a reportable segment, and combining suggestion increasing some reportable segments. In the aspects of segment information disclosing periods, the author suggests that it be disclosed by annual or six months. In the aspects of the segments disclosing format, the thesis suggests "matrix report form" is suitable for the business enterprise which is affected with bigger risks and returns in both of its business segments and geographical segments. Moreover, in order to operate segment easily, the author suggests it should establish standard guidebook, and provide some illustrations and interpretations.