A Study Of Segment Reporting Practices: A Malaysian Perspective

Abstract

<p class="MsoNormal" style="text-align: justify; margin: 0in 0.5in 0pt;"><span style="color: black; font-size: 10pt; mso-themecolor: text1;"><span style="font-family: Times New Roman;">With the increasing complexity of business enterprises and the growing popularity of conglomerate type businesses, it has become clear that consolidated financial statement reporting, while obviously necessary, may not necessarily provide users with sufficient insights for the making of informed decisions. Segment reporting</span><a style="mso-footnote-id: ftn1;" name="_ftnref1" href="http://journals.cluteonline.com/index.php/JABR/author/saveSubmit/#_ftn1"><span class="MsoFootnoteReference"><span style="mso-special-character: footnote;"><span class="MsoFootnoteReference"><span style="color: black; font-size: 10pt; mso-fareast-font-family: 'Times New Roman'; mso-ansi-language: EN-US; mso-themecolor: text1; mso-fareast-language: EN-US; mso-bidi-language: AR-SA;"><span style="font-family: Times New Roman;">[1]</span></span></span></span></span></a><span style="font-family: Times New Roman;"> is therefore fundamentally indispensable and integral to investment analysis process (AIMR, 1993, pg 39; Berg 1990). This study highlights evidence on a fraction of Malaysian companies that do not provide any segment reports at all in contrast to their direct competitors who comply. Additionally it was found that the proprietary costs motive theory seem to hold true for the selected companies, where companies which experience high profit margin are the ones who choose not to disclose segment information. The consequences of non-disclosure of FRS 114</span><a style="mso-footnote-id: ftn2;" name="_ftnref2" href="http://journals.cluteonline.com/index.php/JABR/author/saveSubmit/#_ftn2"><span class="MsoFootnoteReference"><span style="mso-special-character: footnote;"><span class="MsoFootnoteReference"><span style="color: black; font-size: 10pt; mso-fareast-font-family: 'Times New Roman'; mso-ansi-language: EN-US; mso-themecolor: text1; mso-fareast-language: EN-US; mso-bidi-language: AR-SA;"><span style="font-family: Times New Roman;">[2]</span></span></span></span></span></a><span style="font-family: Times New Roman;"> by Malaysian companies has far reaching impacts, right<span style="mso-spacerun: yes;">  </span>from valuation of shares, to corporate governance and control mechanism (Burger and Hann, 2003; 2007). The adoption of suggestions recommended by this study is expected to solve this reporting problem to a certain extent, if not completely. The eventual outcomes of the effectiveness of the new FRS 8 in solving the problem mentioned above would be of great interest to financial analysts and general users. This could well be the direction of future research in this domain.</span></span></p><div style="mso-element: footnote-list;"><br /><span style="font-family: Times New Roman;"><hr size="1" /></span><div id="ftn1" style="mso-element: footnote;"><p class="MsoFootnoteText" style="margin: 0in 0in 0pt;"><a style="mso-footnote-id: ftn1;" name="_ftn1" href="http://journals.cluteonline.com/index.php/JABR/author/saveSubmit/#_ftnref1"><span class="MsoFootnoteReference"><span style="font-size: 9pt; mso-bidi-font-size: 10.0pt;"><span style="mso-special-character: footnote;"><span class="MsoFootnoteReference"><span style="font-size: 9pt; mso-fareast-font-family: 'Times New Roman'; mso-bidi-font-size: 10.0pt; mso-ansi-language: EN-US; mso-fareast-language: EN-US; mso-bidi-language: AR-SA;"><span style="font-family: Times New Roman;">[1]</span></span></span></span></span></span></a><span style="font-family: "Times New Roman","serif"; font-size: 9pt; mso-bidi-font-size: 10.0pt;"> Segment reporting refers to the provision of additional disclosure in the audited annual reports </span></p></div><div id="ftn2" style="mso-element: footnote;"><p class="MsoFootnoteText" style="margin: 0in 0in 0pt;"><a style="mso-footnote-id: ftn2;" name="_ftn2" href="http://journals.cluteonline.com/index.php/JABR/author/saveSubmit/#_ftnref2"><span class="MsoFootnoteReference"><span style="font-size: 9pt; mso-bidi-font-size: 10.0pt;"><span style="mso-special-character: footnote;"><span class="MsoFootnoteReference"><span style="font-size: 9pt; mso-fareast-font-family: 'Times New Roman'; mso-bidi-font-size: 10.0pt; mso-ansi-language: EN-US; mso-fareast-language: EN-US; mso-bidi-language: AR-SA;"><span style="font-family: Times New Roman;">[2]</span></span></span></span></span></span></a><span style="font-family: "Times New Roman","serif"; font-size: 9pt; mso-bidi-font-size: 10.0pt;"> <span style="text-decoration: underline;">http://www.masb.org.my</span></span></p></div></div>