An important argument for providing segmental information in the financial reports is:
A) It is simpler and easier for users to follow.
B) Consolidated information is so aggregated that it may disguise poor performance and very good performance among segments of the entity.
C) The shareholders of the individual companies in the group can use the segment information to assess the performance of their company.
D) The segments of the entity will be taxed separately on their earnings.

Question

Quizplus · Accepted Answer

Providing segmental information allows users to identify the performance of different segments of an entity. This is particularly important because consolidated information might obscure poor performance in one area while highlighting good performance in another, which could distort the perception of the entity's overall performance. Thus, the provision of segmental information allows stakeholders to make more informed decisions. Option A is incorrect, as segmental information is often more detailed and complex than consolidated information, and therefore, it is not necessarily simpler or easier to follow. Option C is only relevant if the shareholders of the individual companies are also users of the consolidated financial statements. Option D is irrelevant because tax matters do not necessarily need to be disclosed in financial statements.

An Important Argument for Providing Segmental Information in the Financial