Potential Costs of Providing Segment Information Include

question 46

Multiple Choice

Potential costs of providing segment information include:

• A) Management taking extra risks in order to attempt to generate increased returns in its segment.
• B) Allowing current or potential investors to identify that the entity is earning high profits in a segment.
• C) Disclosing that a segment is making a loss. This may lead to take-over bids by other organisations.
• D) Allowing current or potential competitors to identify that the entity is earning high profits in a segment. This may increase competition through new entrants or an attempt to replicate the factors leading to the entity's success.
• E) All of the given answers.

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Definitions:

Financial Planning Model

A systematic tool or process used by businesses to forecast their financial performance and plan future financial activities.

Pro Forma Statements

Financial statements that project the future financial performance of a company, often used in planning and capital raising.

Aggregated Statements

These are financial statements that combine the financial data of several segments, subsidiaries, or different time periods of an organization into a single, comprehensive financial statement.