In a Company’s Annual Report, we see a section in the Notes to the Accounts pertaining to Segmental Reporting.
This article seeks to give a basic understanding of what’s segmental reporting all about.
· As we know that The Notes To The Accounts assists the investors/readers of the financial statements with both complementary and supplementary materials whether itâ€™s qualitative or quantitative.
· One such supplementary material is the provision of the Segmental reporting. Here, it provides a further dimension to the financial statements through analysis of turnover, operating profit and net assets, by BUSINESS CLASS & GEOGRAPHICAL SEGMENTS. Most large companies are usually comprised of diverse businesses, rather than being engaged in a single type of business activity, that supply different products and services. Each type of business activity may have:
· a different structure
· different levels of profitability
· different levels of growth potential
· different levels of risk exposure
· A company producing one product but in multiple regions, with somewhat autonomous management and functions by region, may be required to define its reporting segments by geographic region or
· A company with multiple products in one geographic market, with generally autonomous management by product unit, may define its reporting segments by product.
Objectives of Segmental reporting: