Segment reporting under ASC 280 and ASU 2023-07

Segment notes tell investors which parts of a business make money. For years, US GAAP segment disclosures showed little more than revenue and profit; ASU 2023-07 opened up the expense lines behind them. This guide explains how segments are identified under ASC 280, which expenses must now be disclosed, works through a two-segment disclosure with its reconciliation, and covers single-segment companies, what the SEC staff is asking about, and how ASC 280 compares with IFRS 8.

By Awais Jameel, Chartered Accountant. Reviewed by Muhammad Bilal, Chartered Accountant. 4 minute read.

Short answer

ASC 280 Segment Reporting requires public entities to report information about their operating segments using the management approach: segments are the components whose results the chief operating decision maker (CODM) regularly reviews to allocate resources and assess performance. Operating segments with similar economics may be aggregated, and a segment is reportable if its revenue, profit or loss, or assets are 10% or more of the combined total, with reportable segments covering at least 75% of external revenue. ASU 2023-07, effective for fiscal years beginning after December 15, 2023 and interim periods from 2025, added disclosure of significant segment expenses regularly provided to the CODM and included in the segment measure of profit or loss, an amount and description of other segment items, the CODM's title and position and how the CODM uses the measures, and full segment disclosures for companies with a single reportable segment, in interim as well as annual reports. Companies may also disclose more than one measure of segment profit. In this guide's example, two segments report profit of $140 million and $80 million.

At a glance

Applies to
Public entities
Approach
Management's view
Key person
Chief decision maker
Reportable if
10% of revenue, result
ASU 2023-07
Significant expenses
IFRS
IFRS 8, less detail
Segment reporting under ASC 280 and ASU 2023-07Applies to: Public entities; Approach: Management's view; Key person: Chief decision maker; Reportable if: 10% of revenue, result; ASU 2023-07: Significant expenses; IFRS: IFRS 8, less detail.KEY FACTS AT A GLANCESegment reporting under ASC 280 and ASU 2023-07Applies toPublic entitiesApproachManagement's viewKey personChief decision makerReportable if10% of revenue, resultASU 2023-07Significant expensesIFRSIFRS 8, less detailTax BakersSegment reporting under ASC 280 and ASU 2023-07Applies to: Public entities; Approach: Management's view; Key person: Chief decision maker; Reportable if: 10% of revenue, result; ASU 2023-07: Significant expenses; IFRS: IFRS 8, less detail.KEY FACTS AT A GLANCESegment reporting under ASC 280and ASU 2023-07Applies toPublic entitiesApproachManagement's viewKey personChief decision makerReportable if10% of revenue, resultASU 2023-07Significant expensesIFRSIFRS 8, less detailTax Bakers
Key facts at a glance, as set out in this guide.

Who must apply ASC 280?

Public entities: those with debt or equity securities traded in a public market, or that file with the SEC to issue them. Private companies are exempt. Since ASU 2023-07, a public entity with a single reportable segment gives all the segment disclosures too, including significant expenses, rather than only entity-wide information.

How are operating segments identified?

An operating segment engages in business activities that earn revenue and incur expenses, has its operating results regularly reviewed by the CODM, and has discrete financial information available. The CODM is a function, often the chief executive or an executive committee. Segments with similar economic characteristics and similar products, processes, customers, distribution and regulation may be aggregated. A segment is reportable if its revenue, including intersegment sales, its absolute profit or loss, or its assets are 10% or more of the combined amounts, and more segments are reported until the reportable ones cover at least 75% of external revenue. See IFRS 8 operating segments, which works through these tests.

What did ASU 2023-07 add to segment reporting?

Is it a significant segment expense?Is it a significant segment expense?Is it regularly provided to the CODM,or easily computed from what is?NoNot requiredYesIs it included in the reportedmeasure of segment profit or loss?NoNot requiredYesIs it significant to the segment?NoInclude in othersegment itemsYesDisclose as a significant segment expense
Significance is judged from both quantitative and qualitative factors.
  • Significant segment expenses: expenses regularly provided to the CODM, or easily computed from what is provided, and included in the reported measure of segment profit or loss.
  • Other segment items: the difference between segment revenue less significant expenses and segment profit, with a description of what it contains.
  • The CODM: title and position, and how the CODM uses the reported measures to assess performance and allocate resources.
  • More than one profit measure may be disclosed, as long as one is the measure most consistent with GAAP.
  • Interim reports include the segment profit and asset disclosures previously required only annually.

The rules applied to fiscal years beginning after December 15, 2023, so calendar 2024 annual reports, and to interim periods from 2025, retrospectively to all periods presented.

ASC 280 in practice: a two-segment disclosure

A public company has two reportable segments. Its CODM, the chief executive, reviews monthly reports showing each segment's revenue, cost of revenue, selling and marketing and research and development, and uses segment operating profit to allocate budgets. All figures are in $ million.

$ millionDevicesServicesTotal
Revenue8003001,100
Cost of revenue(480)(150)(630)
Selling and marketing(90)(40)(130)
Research and development(60)(10)(70)
Other segment items(30)(20)(50)
Segment operating profit14080220
Unallocated corporate costs(50)
Interest expense(15)
Income before income taxes155

Cost of revenue, selling and marketing, and research and development are significant segment expenses because the CODM receives them for each segment and they make up most of segment costs. Other segment items, $30 million and $20 million, are described as facility costs and allocated IT. The reconciliation from total segment profit of $220 million to income before taxes of $155 million is required too. See ASU 2024-03 expense disaggregation, which breaks down the company-wide expense captions.

What is the SEC staff asking about segments?

Comment letters since ASU 2023-07 have pressed companies to reconcile total segment profit to consolidated income before taxes, to name the CODM and explain how the measures are used, to support single-segment conclusions, often by asking for the reports the CODM receives, and to disclose significant expenses in interim periods as well. Where a company discloses extra measures of segment profit, the staff has treated them as non-GAAP measures subject to the SEC's rules.

How do segments affect goodwill?

Goodwill is tested for impairment at the reporting unit level, and a reporting unit is an operating segment or one level below it, so a change in segments can change the units used for the test. See goodwill impairment under ASC 350.

How does ASC 280 compare with IFRS 8?

They share the management approach and the same thresholds. US GAAP now requires more detail on segment expenses, does not require segment liabilities, and identifies segments by products and services in a matrix organization. The IASB's July 2024 agenda decision on IFRS 8 requires specified amounts only when they are included in the segment measure or regularly provided, a narrower set than ASU 2023-07, and the IASB has chosen operating segments as a future project. See IFRS 8 operating segments and IFRS vs US GAAP key differences.

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Questions people ask

What did ASU 2023-07 change in segment reporting?

It requires public entities to disclose significant segment expenses regularly provided to the CODM, other segment items, the CODM's title and how measures are used, and full segment disclosures for single-segment entities and interim periods.

When was ASU 2023-07 effective?

For fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024, applied retrospectively.

Do single-segment companies have to disclose segment information?

Yes. Since ASU 2023-07, public entities with a single reportable segment must give all ASC 280 disclosures, including significant segment expenses.

What is a significant segment expense?

An expense that is regularly provided to the CODM, or easily computed from information provided, and included in the segment measure of profit or loss, and that is significant to the segment.

Sources

Every fee, date and rule on this page was taken from these official and primary sources.

  1. FASB Accounting Standards Codification: Topic 280, Segment Reporting
  2. Financial Accounting Standards Board
  3. Deloitte: A roadmap to segment reporting
  4. Maynard Nexsen: Insights from recent SEC comments on segment reporting, August 2025

Rules and fees change. If you are reading this long after October 21, 2026, confirm the figures with the source before you rely on them.

IFRS 8IFRS 8 operating segmentsASC 220Disaggregating income statement expenses (ASU 2024-03)ASC 350The goodwill impairment test under ASC 350

More in ASC 280

TopicThe ASC 280 topic page

This guide is general information. It is not tax or legal advice for your situation.