CHAPTER ONE: INTRODUCTION
In the 1960s and 1970s, there was criticism of the accounting practices in developed countries such as the United Kingdom and the United States for not keeping abreast with business activities, which have moved from one business and one geographical segment operations producing single products for local consumption to multinational operations with more than one business segment. Aggregate information in consolidated financial statements could no longer satisfy the information needs of some users especially with regards to the evaluation of different rates of risks, returns and growth in a diversified multinational corporation.
Empirical studies subsequently seem to suggest that segment information do have some benefits especially with regard to the analysis of user decision making (Nobes and Parker, 2000; Baldwin, 1984; Nichols, Tunnell and Seipal, 1995; Emmanuel, Garrod and Frost, 1989), comparisons with the predictive ability of different types of forecasts (Nobes and Parker, 2000; Kinney, 1971; Collins, 1976; Silhan, 1983; Emmanuel and Pick, 1980) and stock market reaction test (Nobes and Parker,2000; Simmonds and Collins, 1978; Mohr, 1983, 1985; Prodhan and Harris, 1989) as compared with consolidated information.
The Financial Accounting Standards Board of the United States, the Accounting Standards Committee (now replaced by the Accounting Standards Board) of the United Kingdom and the International Accounting Standards Committee (IASC) responded to this need by requiring the disclosure of segmental information in their regulations and standards. The original International Accounting Standard (IAS) 14 was issued in Malaysia in 1985. However that standard was criticized for several reasons including the following: