UNIT VI

SEGMENT REPORTING

INTRODUCTION
IFRS 8 Operating Segments requires an entity whose debt or equity securities are
publicly traded to disclose information to enable users of its financial statements to
evaluate the nature and financial effects of the different business activities in which it
engages and the different economic environments in which it operates. It specifies how
an entity should report information about its operating segments in annual financial
statements and in interim financial reports. It also sets out requirements for related
disclosures about products and services, geographical areas and major customers.

LEARNING OBJECTIVES
After reading this unit, you should be able to:
1. Define operating segments.
2. Identify and apply the criteria for reportable segments.
3. Understand the entity-wide disclosures in accordance with IFRS 8.

LECTURE DISCUSSION

OPERATINGSEGMENTSDEFINEDINIFRS8
[Link] of an
entity:
 thatengagesinbusinessactivitiesfromwhichitmayearnrevenuesandincurexpenses
(includestherevenuesandexpensesrelatingtotransactionswithothercomponentsof
the same entity)
 whose operatingresultsare reviewedregularly by the entity's chief operating
decision maker to make decisions about resources to be allocated to the
segment and assess its performance, and the chief operating decision maker
could be an individual, such as the chief executive officer or the chief operating
officer or it could be a group of executives such as the board of directors or a
management committee.
 forwhichdiscretefinancialinformationisavailable

REPORTABLESEGMENTS
IFRS8requiresanentitytoreportfinancialanddescriptiveinformationaboutitsreportable
[Link]
nts that meet specified criteria
 itsreportedrevenue,frombothexternalcustomersandintersegmentsalesortransfers,
is 10 per cent or more of thecombined revenue, internal and external, of all
operating segments, or

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  theabsolutemeasureofitsreportedprofitorlossis10percentormoreofthegreater, in
absolute amount, of (i) the combined reported profit of all operating segments
that did not report aloss and(ii) thecombinedreported loss ofall operating
segmentsthat reported a loss,
 oritsassetsare10%ormoreofthecombinedassetsofalloperatingsegments.

Two or more operating segments may be aggregated into a single operating segment if
aggregation is consistent with the core principles of the standard, the segments have
similar economic characteristics and are similar in various prescribed respects.

If the total external revenue reported by operating segments constitutes less than 75%
of the entity's revenue, additional operating segments must be identified as reportable
segments
(eveniftheydonotmeetthequantitativethresholdssetoutabove)untilatleast75%oftheentity's
revenue is included in reportable segments.

OPERATINGSEGMENTS:DISCLOSURES
Thiscanbeclassifiedintofourcategories:
 GeneralInformation
 Informationaboutprofitorloss,assetsandliabilities
 Reconciliations
 Entity-wideDisclosures

GENERALINFORMATIONINCLUDESDISCLOSURESOF:
 Factorsusedtoidentifyreportablesegments–especiallythebasisoforganizations
 Judgementsinapplyingaggregationcriteria
 Typesofproducts/servicesgeneratingrevenues

INFORMATIONABOUTPROFITORLOSS,ASSETSANDLIABILITIES
 Measurementof segmentitems equal to the measure reported to the Chief
OperatingDecision Maker (CODM)
 Discloseseparatelythefollowingamountsifitisincludedinitemsofsegmentprofitorloss
reported to Chief Operating Decision Maker or regularly reported to him:
 Revenuefromexternalcustomers
 “Internal”revenue
 Interestrevenue
 Interestexpense
 Depreciationandamortization
 Materialitemsofincomeandexpense
 InterestinP/Lofassociatesandjointventure
 Incometaxexpenseorincome
 Materialnon-cashitems
 Provide an explanation of measurement basis of segment profit or loss, segment
assets and segment liabilities for each reportable segment:
 Basisofaccountingfortransactionbetweenreportablesegments
 Nature ofdifferences between measurements of reportable segments’ P/L and

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 entity’s P/L after income tax + discounted operations
 Natureofdifferencesbetweenmeasurementsofreportablesegments’assetsand
entity’s assets
 Nature of differences between measurements of reportable segments’ liabilities
and entity’s liabilities
 Natureofanychangesfrompriorperiodsinthemeasurementmethodstodetermine
segment’s P/L and their effects
 Natureandeffectofasymmetricalallocationstoreportablesegments

RECONCILIATIONS
 Totalofreportablesegments’revenuetoentity’srevenue
 Totalofreportablesegment’sprofitorlosstoentity’sprofitorlossbeforeandaftertaxand
discounted operations
 Totalofreportablesegment’sassetstoentity’sassets
 Totalofreportablesegment’sliabilitiestoentity’sliabilities
 Totalofreportablesegment’samountsforeveryothermaterialitemofinformation
disclosed to the corresponding amount of the entity

ENTITY-WIDEDISCLOSURES
Thesearenotatasegmentlevelbutattheentitylevelofallthesegments
 Informationabouttheproductsandservices
 Informationaboutgeographicalareas
o Revenuefromexternalcustomers
 Attributedtoentity’scountryofdomicile
 Attributedtoallforeigncountries
o Non-currentassets
 Locatedinentity’scountryofdomicile
 Locatedinallforeigncountries
 Informationaboutmajorcustomers
o Reportifrevenuewithsinglecustomeris10%ormoreofthetotalrevenue

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