In one sentencePresenting a business's revenues, results and assets broken down by its operating segments, such as activities or regions that management monitors separately.
Simply put
A business with a retail activity and a wholesale activity may profit from one and lose on the other, and the total hides this. Segment reporting reveals the performance of each segment.
International standard IFRS 8 requires it of businesses whose instruments are traded on the capital market, and builds segments on the way management reviews results internally. Small businesses benefit from the same idea in their internal reports.
Worked example
A company has two segments: retail with revenues of 6,000,000 SAR and profit of 900,000 SAR, and wholesale with revenues of 4,000,000 SAR and profit of 400,000 SAR.
Retail segment margin: 900,000 ÷ 6,000,00015%
Wholesale segment margin: 400,000 ÷ 4,000,00010%
Whole company margin: 1,300,000 ÷ 10,000,00013%
Margin difference between the two segments5 percentage points
Don't confuse it with
Cost centerA cost center is an internal control tool for any unit, while an operating segment is presented in the published statements.
in FullScreen ERP
Cost centers in the system show the profitability of each branch, project or department. General accounts