The impact of IFRS 8 on segmental reporting by Italian listed companies​

7 The birth and dissemination of segment reporting 1.1. Why does segment reporting exist? The need for a segment of a larger group of companies. Thus, it became evident in the consolidated financial reporting alone 5 . The international accounting standard setters, FASB and IASB, to tackle this problem economic environments in which it operates” 6 . From the company's point of view, the motive to disclose segment information derives from the agency theory perspective, and its primary aim is to facilitate investors' earnings predictions. When a company has diversified into segments Whose profits do not correlated with each other, consolidated information does not Provide useful information for investors for earnings forecasts purpose 7 . Companies, however, wish to overcome this problem and include segment information in their financial statements because it reduces information between company owners and managers, and therefore lowers the cost of equity capital 8 . Indeed, segment reporting Has Been developed as one of the specific disclosures required in the financial statements Particularly intended for investors' use. When segmental reporting is high quality, financial statement users can identify risk and return profiles of different segments, and therefore better understand the organization as a whole 9 . Segment reporting should reveal companies' diversification strategies and its transfers of resources across its segments 10 . In a nutshell, useful segment reporting reveals dissimilarities in the company to its investors 11 . It is self-evident that they consider information segment as one of the most valuable pieces of information for their decision-making 12 . For instance, in their survey of 140 sell-side analysts, Epstein and Palepu (1999) found that segment data is the most useful for investment decisions. Segment information was found to provide the analysts with additional insight into the past and future operating performance of both the company and 5 Epstein & Jermakowicz 2008, Troberg 2007 6 FASB 1997 7 Aitken et al. 1997 8 Yoo & Semenenko 2012 9 Troberg et al. 2010 10 Berger & Hann 2007 11 Troberg et al. 2010 12 Yoo & Semenenko 2012