August 5, 1998 Mr. Jonathan G. Katz, Secretary US Securities and Exchange Commission 450 Fifth St, NW Washington, DC 20549 File No. S7-17-98 Dear Mr. Katz: Thank you for the opportunity to comment on the SEC's proposed rule on Segment Reporting. While I have some specific comments about the proposal, I am strongly in favor of the proposal. I believe it is very important to conform the SEC's rules with those now being implemented by companies in accordance with SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, adopted last year by the FASB. One of the problems and concerns which exists - I believe this is an important concern for both preparers and users of financial information - is that companies do not always "tell the same story" from start to finish in a 10-K or other public document. Under current standards and rules, this lack of internal consistency is, in part, driven by the fact that there are different definitions (stemming, presumably, from different objectives) of key concepts (such as business segments). Thus, the way that a company describes itself within the Description of Business section (Item 101), MD&A, and the financial statements has, in the past, been quite different. Indeed, this is one of the major conclusions of the AICPA Special Committee on Financial Reporting (Jenkins Committee). As you know, it is the work of the Jenkins Committee which served as the springboard from which the FASB's project on segment reporting was launched. Thus, on balance, I strongly support the SEC's efforts to conform the rules on what constitutes a segment to those established in SFAS No. 131. My specific comments on the proposal follow. In the discussion of principal products or services, the proposal notes that GAAP requires disclosure of principal products and services on an enterprise-wide basis. I believe that an important notation here is that this is required not only by SFAS No. 131 but also by SOP 94-6. Also in this section, the proposal asks whether the quantitative thresholds of Item 101(c)(1)(i) should be altered. I believe that these requirements should be conformed to 37 of SFAS No. 131. Thus, no specific quantitative thresholds should be established. Regarding the need to restate information, I concur with the proposal to conform the language of Item 101 with that of SFAS No. 131. The proposal would substitute the word "segment" for "industry segment." I believe it would be more consistent with SFAS No. 131 to, instead, substitute "operating segment" for "industry segment." The last paragraph of the proposal's discussion relative to MD&A notes that the Commission expects that the effects of non-GAAP measures will be explained in a balanced and informative manner and that there will be a discussion of how the segment's performance affects its GAAP financial statements. I fully agree with this requirement. Additionally, however, I believe that the Commission should specifically address the consequences of restructurings and impairments. It is my experience that companies' restructuring plans and recognition of impaired assets can be attributed to one of more operating segments. In my opinion, it would be extremely helpful to financial statement readers if MD&A discusses which segment(s) restructurings and impairments relate to. This is information which would not be readily available in the financial statements in most instances. Thus, in my view, it is very important that MD&A address this. The discussion related to Form 20-F proposes replacing the reference to SFAS No. 14 with one to SFAS No. 131. Another possibility which I urge the Commission to consider for foreign filers is to comply with either SFAS No. 131 or IAS 14, Segment Reporting. The last paragraph of the discussion on Geographic areas proposes to conform the rules to SFAS No. 131. While I concur with this intent, I would propose that the Commission specifically adopt a 10% threshold for determining whether countries are individually material. In support of this, I would note that SFAS No. 131 uses a 10% threshold both in determining which operating segments are reportable and in the major customer determination. As such, I believe that a clearly articulated 10% test would make this presentation consistent with the rest of SFAS No. 131. In the last paragraph of the discussion about interim information, the proposal states that no changes are needed to SEC rules to implement the FASB's requirements for interim segment information. While I agree, I believe it bears reinforcing to financial statement preparers the need to consider this interim segment reporting and its potential implications on the MD&A which will be included in the quarterly filings. Again, I urge the Commission to move forward to finalize these proposed rule changes. Sincerely, Paul Munter Professor of Accounting University of Miami Coral Gables, FL 33146