Eshetie

1. OPERATING SEGMENTS
IFRS 8

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

6. Characteristics that identify
operating segments- Flowchart
Yes
Yes
Yes
No
No
No

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.

8. Reportable segments
1
2
3

9. Reportable segments -Thresholds

10. Reportable segments
The 75% TEST
Total external revenue
of reportable segments
75% Entity's revenue
>=

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.