This document outlines the requirements for segment reporting under PFRS 8. It defines key terms like operating segment and reportable segment. An operating segment is a component of an entity engaged in business activities that generates revenue and incurs expenses. It must have discrete financial information available that is regularly reviewed by management. Reportable segments meet certain quantitative thresholds or are individually material even if below the threshold. The document specifies disclosure requirements for reportable segment information like profit/loss, assets/liabilities, products/services, and geographical areas.
This document outlines the requirements for segment reporting under PFRS 8. It defines key terms like operating segment and reportable segment. An operating segment is a component of an entity engaged in business activities that generates revenue and incurs expenses. It must have discrete financial information available that is regularly reviewed by management. Reportable segments meet certain quantitative thresholds or are individually material even if below the threshold. The document specifies disclosure requirements for reportable segment information like profit/loss, assets/liabilities, products/services, and geographical areas.
This document outlines the requirements for segment reporting under PFRS 8. It defines key terms like operating segment and reportable segment. An operating segment is a component of an entity engaged in business activities that generates revenue and incurs expenses. It must have discrete financial information available that is regularly reviewed by management. Reportable segments meet certain quantitative thresholds or are individually material even if below the threshold. The document specifies disclosure requirements for reportable segment information like profit/loss, assets/liabilities, products/services, and geographical areas.
This document outlines the requirements for segment reporting under PFRS 8. It defines key terms like operating segment and reportable segment. An operating segment is a component of an entity engaged in business activities that generates revenue and incurs expenses. It must have discrete financial information available that is regularly reviewed by management. Reportable segments meet certain quantitative thresholds or are individually material even if below the threshold. The document specifies disclosure requirements for reportable segment information like profit/loss, assets/liabilities, products/services, and geographical areas.
SEGMENT REPORTING • An entity shall disclose information to enable users of financial statements to evaluate the nature and financial effects of the business activities in which it engages and the economic environments in which it operates. • Segment reporting is the disclosure of certain financial information about the products and services an entity produces and the geographical areas in which an entity operates. • Purpose of disclosure is to enable investors and users make better assessment of each business activity leading to the understanding of the performance of the entity as a whole.
SCOPE OF PFRS 8 • Separate and individual financial statements of an entity, and to the consolidated financial statements of a group with a parent: o Whose debt or equity instruments are traded in a public market. o That files or is in the process of filing the consolidated financial statements with a securities commission or other regulatory organization for the purpose of issuing any class of instruments in a public market. • If a financial report contains both the consolidated financial statements of a parent and the parent’s separate financial statements, segment information is required only in the consolidated financial statements.
OPERATING SEGMENT • Component of an entity that: o Engages in business activities from which it may earn revenue and incur expenses, including revenue and expenses relating to transactions with other components of the same entity. o Whose operating results are regularly reviewed by the entity’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance. o And for which discrete financial information is available. • Operating segment can be thought of as a distinguishable component of an entity that is engaged in business activities which generate revenue and incur expenses. • To be classified as an operating segment, separate financial information must be available about the segment and its operating results shall be regularly reviewed by a chief operating decision maker.
CHIEF OPERATING DECISION MAKER
• Identifies a function and not necessarily a manager with a specific table. • Function is to allocate resources to the segments and assess their performance. • May be the entity’s CEO, COO or a group of executive directors
IDENTIFYING OPERATING SEGMENTS
• Management approach is used • Means that the operating segments are identified on the basis of internal reports about components of an entity that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segment and to assess its performance. • Operating segments are identified based on the components of the entity that are considered to be important for internal management reporting purposes. REPORTABLE OPERATING SEGMENTS • An entity shall report information about an operating segment that meets any of the following quantitative thresholds: o The segment revenue, including both sales to external customers and intersegment sales or transfers, is 10% or more of the combined revenue, internal and external, of all operating segments. o The absolute amount of profit or loss of the segment is 10% or more of the greater in absolute amount of: ▪ Combined profit of all operating segments that reported a profit. ▪ Combined loss of all operating segments that reported a loss. o The assets of the segment are 10% or more of the combined assets of all operating segments. • Operating segments that do not meet any of the quantitative thresholds may be considered reportable and separately disclosed on a voluntary basis if management believes that information about the segment would be useful to the users of the financial statements.
OVERALL SIZE TEST – 75% THRESHOLD
• Total external revenue of reportable operating segments < 75% of entity’s external revenue o Additional operating segments shall be identified as reportable even if they do not meet the 10% quantitative thresholds until at least 75% of the entity external revenue is included in reportable segments.
AGGREGATION OF SEGMENTS • Two or more operating segments may be aggregated into a “single operating segment” if the segments have similar economic characteristics and the segments share a majority of the following five aggregation criteria: o Nature of product or service o Nature of production process o Types or class of customers o Marketing method or the method used to distribute the product o The nature of the regulatory environment
INFORMATION TO BE DICLOSED FOR EACH SEGMENT
• General information about the operating segment • Information about profit or loss • Information about segment assets and liabilities and the basis of measurement • Reconciliations of the totals of segment revenue, profit or loss, assets, liabilities and other material segment items.
DISCLOSURE ABOUT GENERAL INFORMATION
• Factors used to identify reportable segments • Types of products and services from which each reportable segment derives revenue
DISCLOSURE OF PROFIT OR LOSS, ASSETS AND LIABILITIES
• An entity shall disclose for each reportable segment a measure of profit or loss, total assets and total liabilities. • An entity shall disclose a measure of profit or loss under all circumstances. • An entity shall disclose a measure of total assets and total liabilities for each reportable segment if such an amount is regularly provided to the chief operating decision maker.
ENTITY-WIDE DISCLOSURES • Additional information that is required to be disclosed by all entities if such information is not provided as part of the reportable segment information. • An entity shall disclose information about the following: o Products and services ▪ Revenue from external customers for each product and service o Geographical areas ▪ Revenue from external customers in the entity’s country of domicile, and in all foreign operations in total. ▪ Separate disclosure of material revenue from external customers in an individual foreign country. o Major customers ▪ Major customer is defined as a single external customer providing revenue which amounts to 10% or more of an entity’s external revenue. ▪ The fact of reliance on major customers, the total amount of revenue from major customers and the identity of the segment or segments reporting the revenue shall be disclosed. ▪ Entity is not required to disclose the identity of the major customer or the amount of revenue that each segment reports from that customer.
OTHERS • Reporting of non-reportable segments o Shall be combined and disclosed in an “all other segments” category separately from other reconciling items in the reconciliations. The sources of the revenue included in the “all other segments” category shall be described. • Segment ceasing to be reportable o If management judges that an operating segment identified as a reportable segment in the immediately preceding period is of continuing significance, information about that segment shall continue to be reported separately in the current period even if it no longer meets the quantitative threshold criteria. • Segment becoming reportable o If an operating segment is identified as a reportable segment in the current period in accordance with the quantitative thresholds, segment data for a prior period presented for comparative purposes shall be restated to reflect the newly reportable segment as a separate segment, even if that segment did not satisfy the quantitative threshold criteria in the prior period, unless the necessary information is not available and the cost to develop it would be excessive.
