THE EFFECTS OF THE CHANGE IN SEGMENT REPORTING RULES ON SINGAPORE COMPANIES’ FINANCIAL REPORTING AND CAPITAL ALLOCATION DECISIONS

Abstract

The purpose of this study is to investigate whether the adoption of FRS 108 has an effect on companies’ internal capital allocation decisions. It further examines Singapore companies’ segment disclosure practices, and compares the overall results with those reported in the United States. The analyses were conducted using the non-parametric statistical approach and applying the data which was hand-collected from companies’ annual reports. The results indicate that internal capital allocation is efficient for companies that changed their segment definitions on adopting FRS 108 (“change companies”) even before FRS 108 was implemented. The evidence does not support the suggestion that change companies experience greater improvement in internal capital allocation efficiency upon the adoption of FRS 108 than companies that did not change their segment definitions (“no change companies”). In addition, findings reveal a lack of response towards the implementation of FRS 108 by Singapore companies. The study suggests possible explanations for the differences in findings through a comparative analysis with the United States’ practices.