Segment reporting is majorly based on risks and rewards approach that reflects the internal management and organizational structure. It also reflects the internal reporting systems to the Supervisory Board and Executive Board. The operating divisions consist of corporation’s primary format for reporting segment information while the secondary format is a geographical segment. During the acquisition of Siemens VDO, segment reporting helps to change the structure of the organizational. It brought and dissolved the former automotive system divisions (Siemens VDO). The system is divided into three new dimensions. They include: powertrain, interior, and chassis & safety. Chassis & Safety division combines the active and passive safety activities and driver assistance systems of the Siemens VDO and Continental Corporation. The Powertrain, on the other hand, stand for efficient and innovative systems solutions that cover all aspect of the power trains. The former business areas of the Siemens VDO and Continental Corporation are united to form Powertrain. Lastly, the interior was built to provide information between the vehicle driver and passengers, and between the vehicle and the environment (Rappaport, et al. 2009).
Reporting and internal control within the Continental Corporation helps to provide information on International Financial Reporting Standards. The performance of the Corporation is measured from their operating result. The segments here are expressed as a return on sale and return on capital that is employed. The report also represents EBIT as a portion of the operating assets. The intersegment sales and other proceeds of this corporation are determined at arm’s length prices. Furthermore, administrative services that are performed by corporation management tend to calculate their costs on an arm’s length basis as rendered. However, where direct allocation is possible, the cost are assigned depending on the services performed. The Corporation majorly use report segment information to allocate sales on the domicile of the respective customers. In contrast, the segment assets and capital expenditure are allocated on the domicile of other respective companies. Therefore, segment report helps to divide capital expenditure to property, equipment, plant, and software.
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References
International Accounting Standards Committee. (2010). International accounting standard: Segment reporting . London: International Accounting Standards Committee.
Rappaport, A., Lerner, E. M., & National Association of Accountants. (2009). Segment reporting for managers and investors: National Association of Accountants research study . New York: National Association of Accountants.
