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Ch18 - Operating Segments - Tagged

This document discusses operating segments as defined by IFRS 8. It covers the objectives, scope, identification of operating and reportable segments, and disclosure requirements of IFRS 8, including reconciliations required.

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Zhra Sayed
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25 views22 pages

Ch18 - Operating Segments - Tagged

This document discusses operating segments as defined by IFRS 8. It covers the objectives, scope, identification of operating and reportable segments, and disclosure requirements of IFRS 8, including reconciliations required.

Uploaded by

Zhra Sayed
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Chapter 21

Operating
Segments

Prepared by
Kent Wilson
Objectives

1. Discuss the objectives of financial reporting


by segments

2. Identify the types of entities within the


scope of IFRS 8

3. Explain and evaluate the controversy


surrounding IFRS 8

4. Identify operating segments in accordance


with IFRS 8
Objectives

5. Distinguish between operating


segments and reportable segments

6. Overview the disclosure requirements of


IFRS 8
Objectives of Financial
Reporting by Segments
 IFRS 8 is primarily a disclosure standard relevant
for large organisations that operate in different
geographic locations and/or in diverse businesses

 Segment information is designed to assist users of


financial statements:
 Better understand the entity’s past performance
 Better assess the entity’s risks and returns
 Make more informed judgement about the entity as a
whole
Scope

 IFRS 8 applies to publicly listed (or soon to


be listed) entity’s
 Entities that fall within the scope of IFRS 8
must provide segment information
irrespective or regardless as to whether
consolidated reports are provided
 Voluntary disclosure is permissible
A Controversial
Standard
Identifying Operating
Segments
Identifying Reportable
Segments
 Key Issues:

 The basic criteria and Quantitative thresholds


(10% of Revenues, 10% P/L and 10% of Assets)

 Aggregation criteria (A-E) and The 75% threshold


Identifying Reportable
Segments
Identifying Reportable
Segments
Identifying Operating
Segments
Identifying Operating
Segments
Identifying Operating
Segments
Identifying Operating
Segments

 Operating segments are defined in IFRS 8


para 5 as a component of an entity:
 That engages in business activities from which it earns
revenues and incurs expenses
 Whose operating results are regularly reviewed by the
entity’s chief operating decision maker
 For which discrete financial information is available

 Refer Illustrative Example 21.1 & 21.2


Identifying Reportable
Segments
Disclosure

 Less prescriptive/more general than IAS 14

 General principle of disclosure in IFRS 8 is that an


entity discloses information to enable users to
evaluate the nature and financial effects of the
business activities in which it engages and the
economic environments in which it operates
 Must disclose:
 General information
 Information about reported segment profit/(loss), segment
assets, segment liabilities and the basis of measurement
 Reconciliation of total segment revenue, segment
profit/(loss), segment assets, segment liabilities to
consolidated totals
or Loss, Assets &
Liabilities
 Must disclose ‘a measure’ of segment profit/(loss)

 Need only disclose ‘a measure’ of total assets & liabilities


if such an amount is regularly reported to the CODM

 Additional line items must be disclosed if these items are:


 Included in the measure of segment profit/(loss) or assets
 Regularly reported to the CODM

 IFRS 8 para 23-24 set out the additional line items


required

 Detailed disclosures are required about measurement due


to the discretion allowed to management in this area
Measurement

 Since management has discretion about


measurement, IFRS 8 para 27 requires disclosure on
how the entity has determined the measures of profit
or loss and assets & liabilities for each segment.

 Key issues include:


 Transactions between reportable segments
 Differences in profit or loss between segment and entity
 Differences in asset & liab. values between segment and
entity
 Any changes from prior periods
 Any asymmetrical allocations
Reconciliations
 IFRS 8 requires all of the following reconciliations
to be provided:

 Total reportable segment revenue to consolidated revenue

 Total reportable segment measure of profit/(loss) to


consolidated profit/(loss) before tax and discontinued operations

 Total reportable segment assets to consolidated assets

 Total reportable segment liabilities to consolidated liabilities


(only if segment liabilities are reported)

 Total reportable segment amounts for every other material item


of information disclosed to the corresponding consolidated total
Entity Wide Disclosures

 The following disclosures apply to all


entities subject to IFRS 8:

 Information about products and services

 Information about geographical areas

 Information about major customers

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