This free, guided checker walks your finance team through the key decision points for ASC 280 Operating and Reportable Segments. Answer a few questions to see the likely treatment and the evidence to document.
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This tool is a high-level US GAAP screening aid for general information only and is not accounting, audit or legal advice. Conclusions require entity-specific evidence and judgement - confirm the treatment with your advisor.
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ASC 280 applies to public entities. ASC 280-10-15-3 exempts not-for-profit entities, nonpublic entities, and the separate statements of a parent, subsidiary, joint venture, or equity method investee when those separate statements appear in the same financial report as the consolidated or combined statements. An entity preparing an initial registration statement is in scope for all periods presented, so segment data should be built before the filing, not after.
ASC 280 segment disclosures are not required for a nonpublic or not-for-profit entity (ASC 280-10-15-3).
Official guidance: FASB Accounting Standards Codification
The CODM is a function, not a title - typically the CEO, the COO, or an executive committee that allocates resources to and assesses the performance of the segments (ASC 280-10-50-5). Start from the reporting package actually and regularly delivered to that function, the budgeting and capital allocation process, and board materials. The segment manager indicators in ASC 280-10-50-7 corroborate the identification: an operating segment generally has a manager directly accountable to, and in regular contact with, the CODM.
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Official guidance: FASB Accounting Standards Codification
Regulators routinely challenge single-segment conclusions by comparing them with earnings releases, investor presentations, the entity's website, and the metrics used to set executive compensation. Discrete financial information can exist even without a full income statement by component - regular CODM review of component revenue and gross margin may be enough to create an operating segment. Revisit this conclusion whenever new component-level reporting is introduced.
Single reportable segment - ASU 2023-07 still requires the full set of ASC 280 disclosures, including significant segment expenses.
Official guidance: FASB Accounting Standards Codification
Aggregation is permitted, never required, and every condition must be satisfied - a majority is not enough at this stage. Assess similar economic characteristics using long-term trends and projections of measures such as gross margin, not a single convenient year. Document the aggregation analysis each reporting period; aggregation that masks diverging performance across segments is a recurring restatement and regulatory comment theme.
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Official guidance: FASB Accounting Standards Codification
Run all three tests on the same measurement basis the CODM reviews. The revenue test includes intersegment sales and transfers; the profit or loss test compares each segment's absolute result with the greater, in absolute amount, of the combined profit of all profitable segments or the combined loss of all loss-reporting segments. A segment that newly meets a threshold triggers restatement of prior-period segment data presented for comparative purposes (ASC 280-10-50-17).
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Official guidance: FASB Accounting Standards Codification
The 75 percent test uses external revenue only - intersegment revenue is excluded from the numerator, and the benchmark is consolidated revenue. Operating segments that remain non-reportable are combined and disclosed in an all other category, with the sources of its revenue described (ASC 280-10-50-15). As the number of reportable segments rises above ten, ASC 280-10-50-18 indicates a practical limit may have been reached and further condensation should be considered.
Designate additional operating segments as reportable until at least 75 percent of consolidated revenue is included in reportable segments (ASC 280-10-50-14).
Official guidance: FASB Accounting Standards Codification
ASU 2023-07 requires, for each reportable segment, the significant expense categories that are both regularly provided to the CODM and included in the reported measure of segment profit or loss (ASC 280-10-50-26A), plus an other segment items amount - the difference between segment revenues less the disclosed significant expenses and reported segment profit or loss - with a description of its composition (ASC 280-10-50-26B). The requirement applies in annual and interim periods and applies equally to entities with a single reportable segment.
Disclose each significant expense category and amount by reportable segment (ASC 280-10-50-26A) together with the other segment items amount and its composition (ASC 280-10-50-26B). Report the measure most consistent with consolidated GAAP measurement, any additional measures used by the CODM, and the significant expense disclosures for each reported measure (ASC 280-10-50-28; ASU 2023-07). Provide a narrative description of the nature of the expense information the CODM uses to manage the segments (ASU 2023-07). Provide a narrative description of the nature of the expense information the CODM uses to manage the segments (ASU 2023-07).
Official guidance: FASB Accounting Standards Codification
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