IFRS 8: Operating Segments

OBJECTIVE
 
The objective of this IFRS is to deal with the information that an entity should disclose in its financial statements to enable users to evaluate the nature and financial effects of the business activities and the economic environment in which the business operates.
 
The standard itself deals with two segments:
 
  • ‘reportable’ segments; and
  • ‘operating’ segments.
 
A reportable segment is an operating segment or aggregations of operating segments that meet specified criteria.
 
Operating segments are components of an entity about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance.
 
IFRS 8 requires a reporting entity to disclose in their financial statements a measure of operating segment profit or loss and of segment assets. The IFRS also requires a reconciliation of total reportable segment revenues, total profit or loss, total assets, liabilities and other amounts disclosed within the financial statements for reportable segments to corresponding amounts in the entity’s financial statements.
 

The IFRS also requires an entity to report information about the revenues it derives from its products or services and disclose information concerning the countries in which it earns revenues. In addition, the IFRS requires descriptive information to be disclosed concerning the way the operating segments were determined as well as the products and services provided by the segments, the differences between the measurements used in reporting segment information and those used in the entity’s financial statements as well as changes in the measurement of segment amounts from period to period.

About the author:

Steve Collings FMAAT ACCA DipIFRS is Audit Manager at Leavitt Walmsley Associates www.lwaltd.com. Read all of Collings's analyses of the International Financial Reporting Standards.

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