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TABLE OF CONTENTS CHAPTER I GENERAL PROVISIONS CHAPTER II DETERMINATION OF REPORTABLE SEGMENTS CHAPTER III DISCLOSURE OF SEGMENT INFORMATION CHAPTER I GENERAL PROVISIONS Article 1. For the purpose of regulating the preparation of segment reports and disclosure of relevant information, these Standards are formulated in accordance with the Accounting Standards for Enterprises-Basic Standards. Article 2. Where an enterprise is engaged in multi-businesses or trans-regional businesses, it shall disclose segment information pursuant to these Standards, however, unless it is otherwise provided for by any law or administrative regulation. Article 3. An enterprise shall disclose segment information on the basis of the financial statements it provides to outsiders. An enterprise which provides consolidated financial statements to outsiders shall disclose segment information on the basis of consolidated financial statements. CHAPTER II DETERMINATION OF REPORTABLE SEGMENTS Article 4. To disclose segment information, an enterprise shall identify business and geographical segments. Article 5. The term "business segment" refers to a component of an enterprise that provides a single product or service or a group of related products and services and that is subject to risks and returns different from those of other business segments. To determine business segments, an enterprise shall take into account its internal management requirements and the following factors: (1) The nature of each single product or service, including the specifications, type and final purpose of each single product or service; (2) The nature of the production course, including the adoption of labor-intensive or capital intensive production form, the use of identical or similar equipment and materials, the adoption of entrusted production or processing form, etc.; (3) The client types of the products or services, including bulk clients, dispersed clients, etc.; (4) The ways of sale of products or provision of services, including wholesale, retailing, self-production for self-sale, commissioned sale, contracting, etc.; and (5) The laws and administrative regulations to which the production of products or provision of services is subject, including the restrictions on the business scope or transaction pricing. Article 6. The term "geographical segment" refers to a component of an enterprise that provides products and services within a particular economic environment and that is subject to risks and returns different from those components operating in other economic environments. To determine the geographical segments, an enterprise shall take into account its internal management requirements and the following factors: (1) The similarity of the economic and political environment, including the economic and political stability of the region where the overseas business is situated; (2) The relationship between the businesses in different regions, including that any products are produced in a particular region but are sold in other regions; (3) The proximity of businesses, including whether or not the products made in a certain region are necessary to be further processed in any other region; (4) The special risks relating to the business in a particular region, including the abnormal changes of climate; (5) The provisions on the administration of foreign exchange, that is to say, whether or not the region where the overseas business is located is subject to foreign exchange control; and (6) The foreign exchange risks. Article 7. Where two or more business or geographical segments simultaneously meet the following conditions, they may be consolidated: (1) Having approximate long-term financial performances, including the approximate average long-term gross profit rates, capital return rates and future cash flows; and (2) Taking into account similar factors in the determination of business segments and geographical segments. Article 8. An enterprise shall determine the reportable segments on the basis of the business and geographical segments. If the majority of the revenue of a business or geographical segment is earned from sales to external customers and if any of the following conditions is met, the business or geographical segment shall be determined as a reportable segment: (1) The segment revenue of accounts for 10 % or more of the total revenue of all segments; (2) The segment amount of profit (loss) accounts for 10% or more of the total amount of all segments in the profit or the total amount of all segments in loss, whichever is greater in absolute amount; or (3) The segment assets account for 10% or more of the total assets of all segments. Article 9. If a business or geographical segment fails to satisfy the conditions in Article 8 of these Standards, it may be treated in accordance with the following provisions: (1) It is directly designated as a reportable segment without considering the segment scale; (2) If it is not directly designated as a reportable segment, it may be combined with one or more other similar segments failing to satisfy the conditions of Article 8 of these Standards so as to form a reportable segment; or (3) If it is not designated as a reportable segment and if it is not combined with other segments, it shall be separately disclosed under "other items" when the segment information is disclosed. Article 10. If the total external transaction revenue attributable to reportable segments is less than 75% of the total consolidated or enterprise revenue, additional segments (even if they do not satisfy the conditions of Article 8 of these Standards) shall be determined as reportable segments until at least 75% of total consolidated or enterprise revenue is included in reportable segments. Article 11. If the internal management of an enterprise is determined on the basis of the different levels of vertically integrated business, even if a majority of the revenue is not generated from external transactions, the different levels of vertically integrated business may be identified as a separate reportable business segment. Article 12. For a reportable segment determined in the previous period, if the enterprise considers that it is still important in the current period, even if it fails to meet the conditions of Article 8 of these Standards, it shall be still determined as a reportable segment for the current period. CHAPTER III DISCLOSURE OF SEGMENT INFORMATION Article 13. An enterprise shall disclose segment information by identifying the primary reporting format and secondary reporting format: (1) If the enterprise's risks and returns are predominantly affected by the products and services of the enterprise, the primary format for the disclosure of the segment information shall be based on the business segments and the secondary format on the geographical segments; (2) If the majority of the enterprise's risks and returns are simultaneously affected by the business activities of the enterprise in different countries or regions, the primary format for the disclosure of segment information shall be based on the geographical segments and the secondary format on the business segments; (3) If the risks and returns are simultaneously affected to a relatively large extent by the differences in the products and services of the enterprise, as well as by the differences of the countries or regions where the businesses of the enterprise are located, the primary format for the disclosure of segment information shall be based on the business segments and secondary format on the geographical segments. Article 14. For the primary reporting format, the enterprise shall, in its notes, disclose the revenues, expenses, profits (losses), total amount of assets and total amount of liabilities of the segments: (1) The segment revenue refers to the revenue attributable to the external transactions of a segment and the revenue from inter-segment transactions. The revenue from external transactions of segments and the revenue from inter-segment transactions shall be disclosed, respectively; (2) The segment expenses refer to the expenses attributable to the external transactions of a segment and the revenue from inter-segment transactions. The depreciation expenses, amortization expenses as well as other significant non-cash expenses of the segments shall be disclosed, respectively; (3) The segment profits (losses) refer to the balance of the segment revenue less the segment expenses. In a consolidated balance sheet, the segment profits (losses) shall be determined before the profits and losses of minority shareholders shall be adjusted; (4) The segment assets refer to the operating assets that are directly attributable or reasonably allocable to a segment. The amount of segment assets to be disclosed shall be determined on the basis of the amount less the relevant accumulative depreciation or amortization amount as well as the accumulative impairment provision. When the total amount of segment assets is disclosed, the total amount of costs for the projects under construction and the total amount of costs for the purchase of fixed assets and intangible assets which are incurred in the current period shall be disclosed separately; (5) The segment liabilities refer to the operating liabilities that are directly attributable or reasonably allocable to a segment. Article 15. If the daily activities of a segment is of financial nature, the interest revenue and expenses shall be disclosed as segment revenue and expenses. Article 16. An enterprise shall present reconciliation between the segment information it discloses and the information about the total amount in the consolidated financial statements or enterprise financial statements. The segment revenue shall be reconciled to the enterprise's revenue from external transactions (including the revenue obtained by the enterprise from external transactions which is not included in any segment revenue). The segment profits (losses) shall be reconciled to the business profits (losses) and the net profits (losses) of the enterprise. The total amount of segment assets shall be reconciled to the total amount of assets of the enterprise. The total amount of segment liabilities shall be reconciled to the total amount of liabilities of the enterprise. Article 17. If the primary reporting format for the segment information is based on the business segments, the following information shall be disclosed for the secondary reporting format: (1) If the revenue of a geographical segment from external transactions accounts for 10 % or more of the total amount of revenue of the enterprise from external transactions, the enterprise shall disclose the revenue from external transactions on the basis of locations of the external clients; and (2) If the amount of assets of a geographical segment accounts for 10% or more of the total amount of assets of all geographical segments, the enterprise shall disclose the total amount of assets on the basis of the locations of the assets. Article 18. If the primary reporting format for segment information is based on geographical segments, the following information shall be disclosed for the secondary reporting format: (1) If the revenue of a business segment from external transactions accounts for 10 % or more of the total amount of revenue of the enterprise from external transactions, the enterprise shall disclose the revenue from external transactions; and (2) If the amount of assets of a business segment accounts for 10% or more of the total amount of assets of all business segments, the enterprise shall disclose the total amount of assets of the segments. Article 19. If the inter-segment transfer transactions are measures on the basis of the actual transaction price. The basis for the determination of the transfer price as well as the changes therein shall be disclosed. Article 20. An enterprise shall disclose the segment accounting policies, however, unless the segment accounting policies are the same as those used in the consolidated financial statements or enterprise financial statements. If any change in the segment accounting policies very significant, it shall be disclosed in accordance with the Accounting Standards for Enterprises No. 28-Changes in Accounting Policies and Estimates‚ and Correction of Errors, and the relevant comparable figures shall be provided. If it is impractical to provide comparable figures, the reason shall be given. Where an enterprise alters the classification of any segment and the comparative data it provides is unfeasible, it shall disclose pre-alteration and post-alteration information of the segment in the year when the classification of the segment is altered. The accounting policies of a segment refer to the accounting policies adopted in the making of consolidated financial statements or the financial statements of the enterprise as well as the accounting policies which are particularly related to the segment report. The accounting policies which are particularly related to a segment report include the methods for determining the segments, the methods for determining the transfer pricing among the segments, and the basis for allocating revenues and expenses to the segments concerned, etc. Article 21. To disclose segment information, an enterprise shall provide comparable data of the previous periods. However, it shall be an exception in the case of providing impractical comparable data. |
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