A Study Of Segment Reporting Practices: A Malaysian Perspective

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Samuel Jebaraj Benjamin
Saravanan Muthaiyah
M. Srikamaladevi Marathamuthu
Uthiyakumar Murugaiah


segment reporting, FRS 114, non-disclosure, profitability, proprietary costs


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[1] 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[2] by Malaysian companies has far reaching impacts, right  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.

[1] Segment reporting refers to the provision of additional disclosure in the audited annual reports

[2] http://www.masb.org.my


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