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Business strategy shifting? Update segment reporting to communicate the impact to stakeholders

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Observations from the front lines

Companies are not only responding to the lasting impacts of COVID-19 but also adapting to handle similar disruptions in the future. These changes include repositioning themselves and shifting to digital channels, products and services with speed and agility to retain existing customers as well as capture new opportunities.

As companies navigate through this environment, including changes in market strategy and organizational realignment, investors are seeking transparency on the impact of these shifts. Management has the opportunity to better align their segment reporting with their dynamic strategies. Evaluating performance at a more granular level can also help prioritize resources.

Trend analysis for the last two years shows that companies with changes to business segments had positive excess returns after one year compared to companies that did not change their segments.

Purpose driven performance measures explain the value created from new strategies. External stakeholders need this information to accurately value individual businesses.

Why it matters

Segment Disclosures: Investor Perspectives, a study published by the CFA Institute,1 shows that investors rate segment disclosures as important as, or more important than, enterprise-wide disclosures. It allows management to communicate the performance impact from changes in business strategy by providing:

  • Transparency: Discussion of segment performance provides stakeholders with insight into how the company is structured to run its business. Aggregation of operating segments into reportable segments is not compulsory; accordingly, companies may provide disaggregated information by comparison to what is otherwise required if they believe it would provide useful information to investors. For example, management may desire to provide information on a growing business that, although immaterial today, may be an area of focus in the future.
  • Comparability: Stakeholders use segment information to assess results, compare performance with competitors and create investor valuation models.
  • Accountability for executing strategy.
  • Consistency: Aligning segment information helps inform how the company structured to run its business.
1 - CFA Institute published a paper (Segment Disclosures: Investor Perspectives) in June 2018 highlighting 75% of surveyed investors rate segment disclosure as being very important to their analysis whereas only 13.4% were satisfied with current segment disclosure. 90.1% of the respondents viewed segment disclosures are as important or more important as entity-wide disclosure.

When do companies reassess segments? 

Reassessing segmentation can occur for many reasons, including:

In light of changes precipitated by COVID-19, companies are reinventing and reimagining their business strategy. As such, companies are contemplating entering new markets or reshaping the customer’s experience.

Companies are continuously adapting to digital channels, launching artificial intelligence initiatives, modernizing their technology capabilities in their operations, distribution channels and products to meet the ever changing expectations of customers. This may result in companies entering into new markets or launching new products.

Other business considerations

  • Growing business, immaterial today, may be an area of focus in the future
  • Stock price stagnation
  • Structural shift as a result of a merger, acquisition, divestiture or other major deals or events
  • Change in business model
  • Change in leadership or management reshuffle

Management determines the discrete financial information required in its internal reporting package to effectively allocate resources and drive its strategy. This information serves as the basis for external segment reporting.

How PwC can help

PwC has a team of experienced professionals who can help you navigate through a holistic solution, including:

Segmentation strategy

Linking the company’s performance measures to implement its market strategy and determine discrete information required for its internal reporting package.

Investor relations

Determining communication strategy for timing of disclosures, additional performance metrics and KPIs.

Financial planning and alignment with business

Recasting budgets, projections and cash flow targets for new segments.

Update of internal controls

Aligning internal controls over financial reporting in light of changes to underlying data, systems and processes.

Data, system and processes

Evaluating changes to data, systems and processes to capture new segment information, evaluate changes in a test environment and go live.

Project management and governance

Governance structure, timeline and roadmap to define milestones, team structure and responsibilities, status  reporting and incorporation of digital accelerators.


Financial reporting

Developing segmentation methodology, recasting prior periods, drafting technical memos, assessing goodwill implications (i.e., impairment analysis).

Data extraction and analysis

Extracting, reconciling and validating data from financial reporting systems including sub-ledgers. Recasting prior periods into financial environment for comparability.

The bottom line

As companies evaluate their business strategy, segment reporting can be a complex and time consuming part of the process. Consider the challenges to implement and operationalize any changes early to prevent surprises and delays.

Contact your PwC advisor or one of our segmentation professionals to discuss the details of your business and reporting strategy. 

“Observations from the front lines” provides PwC’s insight on current economic issues, our perspective regarding the financial reporting complexities and what companies should be thinking about to effectively address those issues. For more information, visit


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Dan Furniss

Partner, Deals, PwC US

Kinjal Parekh

Director, Deals, PwC US

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