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Segment reporting is a method of representing financial statement items by segment. Section-by-section findings are displayed later. Annual financial statements, augmented with segment data from segment reporting, give a more detailed picture of a company's financial position, asset position, and profit position.

Following are some of the reasons why financial data is disclosed by segments:

1. Investors, creditors, and other consumers of financial statements would benefit from a more comprehensive disclosure of the information.
2. Before evaluating a firm in its entirety, appraisers can assess important aspects of the business.
3. Such information is not only relevant and desirable but also practical to calculate.
4. The growth potential of an enterprise can be assessed by looking at the growth potential of its priority sectors.
5. Users can make a more informed decision about whether to remove or add a part.
6. Since different segments can have different rates of growth, profitability, and degree of risk, forecasting future earnings power at the segment level is more effective.
7. Although management responsibility is usually segmented within the organization, segmental data is better at assessing managerial competence.