What Are the Requirements of FASB Statement No. 131?
FASB Statement No. 131 (Disclosures about Segments of an Enterprise and Related Information) mandates that the amount reported for each segment item be based on what is used by the ‘‘chief operating decision maker’’ to determine how many resources to assign to a segment and how to evaluate the performance of that segment. The term chief operating decision maker may apply to the chief executive officer or chief operating officer or to a group of executives. It may also relate to a function and not necessarily to a particular person. Revenue, gains, expenses, losses, and assets should be allocated to a segment only if the chief operating decision maker takes it into account in measuring a segment’s profitability to formulate a financial or operating decision. The same applies to allocating to segments eliminations and adjustments applying to the entity’s general-purpose financial statements. Any allocation of financial items to a segment should be rationally based. In measuring a segment
