2. INTRODUCTIONINTRODUCTION
Better understand the organisation’s past performance
Better assess the organisation’s risks and returns
Make more informed judgements about the organisation as a
whole
3. IFRS 8 OPERATING SEGMENTS
Objective – an organisation should disclose information to enable
users of its financial statements to evaluate the nature and
financial effects of the types of business activities in which it
engages and the economic environments in which it operates.
Scope – IFRS 8 applies to the financial statements of an entity:
whose debt or equity instruments are traded in a public
market; or
that files, or is in the process of filing, its financial
statements with a regulatory organisation for the purpose
of issuing any class of instruments in a public market.
If a financial report contains both consolidated and separate
financial statements, segment information is required in respect
of the consolidated financial statements only.
4. Operating segments
A component of an organisation:
that which it may earn revenues and incur expenses;
whose operating results are reviewed regularly by the
organisation’s Chief Operating Decision Maker
(CODM) to make decisions about resources to be
allocated to the segment and assess its performance;
and
for which discrete financial information is available.
5. IFRS 8 -Four Steps
Identify the chief operating decision maker
(CODM) and the operating segments1
Identify the reportable segments2
Disclose segment information3
Provide Entity-wide disclosures4
7. Aggregating operating segments
operating segments often exhibit similar long-term financial
performance if they have similar economic characteristics
two or more operating segments may be aggregated into a single
operating segment if:
1. the aggregation is consistent with the core principle of IFRS 8
2. the segments have similar economic characteristics
3. the segments are similar in each of the following respects:
the nature of the products and services
the nature of the production processes
the type or class of customer for their products and services
the methods used to distribute their products or provide their
services
if applicable, the nature of the regulatory environment, for
example, banking, insurance or public utilities.
11. Disclosure of segment information
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.
Therefore, an entity should disclose the following for each period for
which a statement of comprehensive income is presented:
1. general information
2. reported segment measures and explanation of the
measurements of those measures
3. reconciliations of the totals of reportable segment
information to the entity's corresponding amounts
12. Entity-wide disclosures
Entities should provide disclosures about:
1.products and services
2.geographical areas
3.major customers
these disclosures are required for the entity as a whole rather than by
reportable segment and referred to as entity-wide disclosures
entity-wide disclosures are particularly useful when the segment disclosures
do not otherwise include total revenues by product, service or revenue stream
these disclosures are based on amounts incorporated in the primary financial
statements rather than a management basis.
Editor's Notes
PRESENTER NOTES:
PRESENTER NOTES:
PRESENTER NOTES:
IFRS 8 requires an entity to identify its operating segments
the entity identifies its 'reportable segments' from its operating segments
for some large entities, the number of operating segments identified may be excessive and the benefit of disclosing segmental information for each separate segment may be insufficient to justify the cost
therefore, prior to determining the reportable segments, IFRS 8 permits, not requires, to aggregate segments with similar economic characteristics that meet the aggregation criteria set out in the slide.
PRESENTER NOTES:
once the entity's operating segments have been identified and aggregation of operating segments has been considered, the entity must then determine which operating segments are reportable
the quantitative thresholds- See the next slide.
PRESENTER NOTES:
quantitative thresholds are included in IFRS 8 so as to limit the disclosures to a reasonable level
the amounts considered when looking at the thresholds are the amounts reported to the CODM
if one or more of the aggregated segments has reported a profit but another has reported a loss, the net profit or loss is considered for the purpose of determining the reportable threshold for segment results
when reviewing the 10% threshold, transactions between operating segments are included as this gives information about the dependency of the operations.
PRESENTER NOTES:
IFRS 8 does not specify how to select the additional segments
the additional segments do not need to be the next largest by any of the measures
judgment should be based on the specific facts and circumstances.
PRESENTER NOTES:
an entity should disclose the following for each period for which a statement of comprehensive income is presented:
general information. See the next slide
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PRESENTER NOTES:
the entity-wide disclosures are not required where the necessary information is not available and the cost to develop it would be excessive
however, because the information is on an entity basis, it is not expected that this exemption will be invoked often
Entity-wide disclosures:
products and services- see the next slide
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