The Role Of Activity-Base Costing In The Development Of Segmented Financial Statements: An Examination

Abstract

The recent financial crisis has brought into question a number of the qualities and characteristics of current financial reporting practices. One of the areas in question is that of reporting segmental information in relation to “paper” gains and losses. In this paper, Activity is divided between economic and financial activities. We bring to the fore some of the historical sources of the principles on which segmental reporting is based, and then propose an alternative reporting scheme along the lines of activity-based costing. The advantages and shortcomings of the proposed system are examined and the implications of the use of the system are discussed.