(no subject)
c) Without a thorough knowledge of the business and an understanding of such important factors as the competitive environment and capital investment requirements, the investor may find the segmented information meaningless or may even draw improper conclusions about the reported earnings of the segments. Additional disclosure may harm reporting firms because it may be helpful to competitors, labor unions, suppliers, and certain government regulatory agencies. Additional disclosure may discourage management from taking intelligent business risks because segments reporting losses or unsatisfactory earnings may cause stockholder dissatisfaction with management. The wide variation among firms in the choice segments, cost allocation, and other accounting problems limits the usefulness of segmented information. The investor is investing in the company as a whole and not in the particular segments, and it should not matter how any single segment is performing if the overall performance is satisfactory. Certain technical problems, such as classification of segments and allocation of segment revenues and costs (especially “common costs”), are formidable.