segment reporting

Explain why different products and services and different geographical areas may be subject to differing rates of profitability and opportunities for growth and risks.

Actually, I dont understand what the above statement say and how i can answer this question. Can anyone help me. thanks alot.

1 Answer

Rating
  • 1 decade ago
    Favorite Answer

    Okay, segmental reporting applies to listed company's financial statements. Imagine a company with business in (1) catering services; (2) retail services; (3) brokerage business, located in (a) Hong Kong; (b) Europe (c) USA.

    The profit margin for different industries varies. Brokerage business have higher GP than the other products/services, and thus differing rates of profitability. In the same way, so does different geographical areas. The risks and growth rates associated may also differ.

    Please refer to HKAS 14, segment revenue, expenses, results, assets, liabilities directly attributable to each segment should be disclosed. This will enhance users of financial statements understand the risks and rewards associated with the company's area of business.

Still have questions? Get your answers by asking now.