Segment Disclosure Quantity and Quality under IFRS 8: Determinants and the Effect on Financial Analysts' Earnings Forecast Errors (formerly titled The Interplay between Segment Disclosure Quantity and Quality)

51 Pages Posted: 25 Jul 2014 Last revised: 20 Nov 2016

See all articles by Paul André

Paul André

HEC Lausanne

Andrei Filip

ESSEC Business School

Rucsandra Moldovan

John Molson School of Business, Concordia University

Date Written: June 14, 2016

Abstract

Focusing on segment disclosures under the management approach, we investigate managers’ choices with respect to both segment reporting quantity and quality and the usefulness of these two characteristics for financial analysts. We measure quantity as the number of segment-level line items and quality as the cross-segment variation in profitability — arguing that more managerial discretion can be exercised over quality than over quantity. We find that managers solve proprietary concerns either by deviating from the suggested line-item disclosure in the standard, or, if following standard guidance, by decreasing segment reporting quality. Moreover, financial analysts do not always understand the quality of segment disclosures, suggesting that a business-model type of standard creates difficulties even for sophisticated users. Our results inform standard setters as they start working on a disclosure framework and as they consider the business model approach to financial reporting.

Keywords: segment reporting; disclosure quality; disclosure quantity; financial reporting choices; IFRS 8

Suggested Citation

Andre, Paul and Filip, Andrei and Moldovan, Rucsandra, Segment Disclosure Quantity and Quality under IFRS 8: Determinants and the Effect on Financial Analysts' Earnings Forecast Errors (formerly titled The Interplay between Segment Disclosure Quantity and Quality) (June 14, 2016). International Journal of Accounting, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2470466 or http://dx.doi.org/10.2139/ssrn.2470466

Paul Andre

HEC Lausanne ( email )

UNIL-Dorigny
Anthropole
Lausanne, 1015
Switzerland

Andrei Filip

ESSEC Business School ( email )

3 Avenue Bernard Hirsch
CS 50105 CERGY
CERGY, CERGY PONTOISE CEDEX 95021
France
+33 1 34 43 33 61 (Phone)

Rucsandra Moldovan (Contact Author)

John Molson School of Business, Concordia University ( email )

Montreal, Quebec H3G 1M8
Canada
+1-514-848-2424 ext 2528 (Phone)

HOME PAGE: http://https://sites.google.com/site/rucsandramoldovan

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