Statement of Financial and Accounting Standart No 24

FAS 24: Reporting Segment Information in Financial Statements
That Are Presented in Another Enterprise's Financial Report an
amendment of FASB Statement No. 14
FAS 24 Summary
If consolidated or combined financial statements are accompanied by a complete set of
separate parent company or investee company (or group of investee companies) financial
statements, this Statement eliminates the requirement to disclose segment information in the
separate financial statements of:
• The parent company or affiliated companies that have been consolidated or combined in that
financial report.
• Certain foreign investee companies.
• Investee companies accounted for by the cost or equity method if that segment information
is not significant in relation to the consolidated or combined financial statements.
INTRODUCTION AND BACKGROUND INFORMATION
1. The FASB has been asked whether FASB Statement No. 14, "Financial Reporting for
Segments of a Business Enterprise," requires segment information 1 to be disclosed in a
complete set of parent company financial statements that are presented with the consolidated
financial statements of that company. That question was raised apparently because of
uncertainty about the intention of the last sentence of paragraph 7 of Statement No. 14, which
states:
When a complete set of financial statements that present financial position,
results of operations, and changes in financial position in conformity with
generally accepted accounting principles is presented for a subsidiary, corporate
joint venture, or 50 percent or less owned investee, each such entity is considered
to be an enterprise as that term is used in this Statement and thus is subject to its
requirements whether those financial statements are issued separately or included
in another enterprise's financial report.

The Board expanded this question and also considered the need for segment information in a
complete set of financial statements 2 of a subsidiary, corporate joint venture, or other investee if
those financial statements are presented in the parent's or investor's financial report.3
2. FASB Statement No. 21, "Suspension of the Reporting of Earnings per Share and Segment
Information by Nonpublic Enterprises," suspended the requirement to disclose segment
information in a complete set of separately issued financial statements of a subsidiary, corporate
joint venture, or other investee that is a nonpublic enterprise (as that term is defined in Statement
No. 21).
3. An Exposure Draft of a proposed Statement on "Reporting Segment Information in
Financial Statements That Are Presented with Another Enterprise's Financial Report" was issued
on July 19, 1978. Thirty-five letters of comment were received in response to the Exposure
Draft. Virtually all respondents expressed or implied agreement with the proposal to eliminate
the requirement to disclose segment information in the financial statements of a parent company
or affiliated companies if those financial statements also are consolidated or combined in other
financial statements that are presented in the same financial report. Many respondents also
recommended that the Board reduce or eliminate the requirement to disclose segment
information in the financial statements of other investees that are presented in the same financial
report. The Board considered those recommendations and concluded that the exemption
proposed in the Exposure Draft should be expanded in certain respects.
4. The Board has concluded that it can reach an informed decision on the basis of existing
information without a public hearing and that the effective date and transition specified in
paragraph 6 are advisable in the circumstances.
STANDARDS OF FINANCIAL ACCOUNTING AND REPORTING
Amendment to FASB Statement No. 14
5. The last sentence of paragraph 7 of FASB Statement No. 14 is deleted and the following
sentences and footnotes are added to the end of that paragraph:
If a complete set of financial statements that present financial position, results of
operations, and changes in financial position in conformity with generally
accepted accounting principles is presented for a parent company, subsidiary,
corporate joint venture, or 50 percent or less owned investee, each such entity or a
combined group of such entities is considered to be an enterprise as that term is
used in this Statement [Statement No. 14] and thus is subject to its requirements if
those financial statements are issued separately.* However, disclosure of the
information that would otherwise be required by this Statement [Statement No.
14] need not be made in a complete set of financial statements that is presented in another enterprise's financial report (i.e., the primary reporting enterprise):
a. If those financial statements are also consolidated or combined in a complete
set of financial statements and both sets of financial statements are presented
in the same financial report, or
b. If those financial statements are presented for a foreign investee that is not a
subsidiary of the primary reporting enterprise+ unless that foreign investee's
separately issued financial statements disclose the information required by
this Statement [Statement No. 14], for example, because the investee
prepares its separately issued financial statements in accordance with United
States generally accepted accounting principles, or
c. If those financial statements are presented in the financial report of an
enterprise that is not subject to the requirements of FASB Statement No. 14
because of the suspension provided by FASB Statement No. 21.
Unless exempted above, if a complete set of financial statements for an investee
(i.e., subsidiary, corporate joint venture, or 50 percent or less owned investee)
accounted for by the cost or equity method is presented in another enterprise's
financial report, the information required by this Statement [Statement No. 14]
shall be presented for the investee if that information is significant in relation to
the financial statements of the primary reporting entity in that financial report
(e.g., the consolidated or combined financial statements). To determine the
information required by this Statement [Statement No. 14] to be disclosed for an
investee in such situations, the percentage tests specified in paragraphs 15, 32,
and 39 of this Statement [Statement No. 14] shall be applied as specified in those
paragraphs in relation to the financial statements of the primary reporting entity
without adjustment for the revenues, operating profit or loss, or identifiable assets
of the investee.
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*FASB Statement No. 21 suspends the requirements of this Statement [Statement No. 14] for the
separately issued financial statements of a nonpublic enterprise as defined by that Statement.
+The term "foreign investee that is not a subsidiary of the primary reporting enterprise," as used in
this Statement [Statement No. 14] refers to an enterprise incorporated or otherwise organized and
domiciled in a foreign country if fifty percent or more of that enterprise's voting stock is owned by
residents of a foreign country.
Effective Date and Transition
6. This Statement shall be effective January 1, 1979 retroactive to fiscal years beginning
after December 15, 1976. Earlier application is encouraged.
This Statement was adopted by the affirmative votes of five members of the Financial
Accounting Standards Board. Messrs. Kirk and Gellein dissented.
Messrs. Kirk and Gellein dissent from the Statement because the exemption in paragraph
5b fails tests of usefulness and evenhandedness. Pursuant to that paragraph, the furnishing of
segment information for an enterprise whose financial statements conform with generally
accepted accounting principles depends on factors such as the extent to which the enterprise is
owned by others, where it is incorporated, where it is domiciled, and where its shareholders
reside. Those factors, in the view of Messrs. Kirk and Gellein, are not relevant to the usefulness
of financial statements. Further, in their view, it is not evenhanded to single out for exemption a
specified class of investees.
Mr. Gellein also disagrees with that aspect of the Statement that applies the tests for
segment significance by comparing amounts in the separate financial statements with amounts in
the consolidated statements, as reported. He believes it illogical to omit from the denominator of
the ratios amounts for the segment being tested. The results may be irrational depending on the
mix of industry segments among the enterprises and the extent of interenterprise transfers.
Members of the Financial Accounting Standards Board:
Donald J. Kirk, Chairman
Oscar S. Gellein
John W. March
Robert A. Morgan
David Mosso
Robert T. Sprouse
Ralph E. Walters
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Footnotes
FAS24, Footnote 1--The term "segment information" as used in this Statement, is the
information required to be disclosed by FASB Statement No. 14 concerning:
a. The enterprise's operations in different industries.
b. Its foreign operations and export sales.
c. Its major customers.
FAS24, Footnote 2--The term "complete set of financial statements," as used in this Statement,
refers to a set of financial statements (including necessary footnotes) that present financial
position, results of operations, and changes in financial position in conformity with generally
accepted accounting principles.
FAS24, Footnote 3--The term "financial report" as used in this Statement, includes any
compilation of information that includes one or more complete sets of financial statements, such
as in an annual report to stockholders or in a filing with the Securities and Exchange
Commission.

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