Study On The Application Of The New Segment Report Standard

It has been a major trend toward enterprise groups to operate in differentindustries,in different regions in the worldwide, now only the simple consolidatedfinancial statements can not meet the decision-making needs to the users ofaccounting information, due to the high degree of generality of diversified operationsinformation, segment reports have come into being. After50years of development,the patterns of segment reports disclosure have gone through the “industry approach”,“risks-and-rewards approach” and “management approach", because the"management approach "agrees with more decision usefulness view and also to relivesthe managers′responsibilities,so it has been applied all over the world.The “management approach” is a substantial improvement, but it also has someproblems, in addition to reducing the comparability and verification of segmentinformation, the most important, it gives more autonomy for companies themselvesto disclose their segment information,therefore, it can easily make the disclosure ofaccounting information into the dilemma of contradiction and pain, for example, forthe reason of their own management structure, they can regard the whole enterprise asonly a operating segment and then will not need to disclose segment reports, or tocover up some operations with poor performance, etc. Therefore, it is needed to makecertain norms under the guidance of the idea of this method. In this paper the authorreexamines he determination of the operating segments and thinks it should be basedon which can ensure the performance evaluation and (capital) resource allocationmechanism of different segments in normal operation. In addition, the author thinkoperating segments which companies have determined can be verified by theirstrategy and management structure which are closely related to the performance evaluation and resource allocation mechanism.The inherent defects of the "management approach" is an important reason forthe poor condition of the application of the Segment Reporting Standard, but it is themain reason that enterprises do not pay enough attention to the standard, on the caseof domestic electrical power listed companies in2007—2010, the author analyzes thesegment information disclosure in the two stages of the Segment Reporting Standard.Under the industrial background of the rapid development of the new energyelectricity and other related industries, there are only a small part of those listedcompanies to disclose segment reports, the majority only briefly report sub-industries,sub-products and sub-regions information in accordance with the SEC which are notreported perfectly also. In the "management approach" stage,the division ofoperating segments should be improved in the future, combined with their strategyand organizational structure, new energy electricity segment is seldom disclosed.Moreover, companies audited by the international firms disclosed segment reportswell, while companies audited by the domestic firms disclosed rarely, the SegmentReport Standard is an important part of the Accounting Standards for BusinessEnterprises， the auditing firms have the responsibility to assurance reasonably thecompanies to disclosure segment reports. Therefore, the enterprises themselves andthe auditing firms should be to strengthen the importance on the Segment ReportStandard.The condition that the Segment Report Standard is not implemented well is dueto the developing capital market in China which can not form the Anti-drivingMechanism to disclose segment information. Of course, it is related with China’senterprises management level as well as the "management" itself defective. In thefuture, users of accounting information, third-party service organizations and theregulatory bodies should work together to promote application level of the SegmentReport Standard.