IFRS 8 Operating Segments

IFRS 8 applies to the financial statements of any entity whose debt or equity instruments are traded in a public market or who is seeking to issue any class of instruments in a public market. Other entities that choose to disclose segment information should make the disclosures in line with IFRS 8 if they describe such disclosures as 'segment information'.

IFRS 8 defines an operating segment as a component of an entity:

  • that engages in revenue earning business activities

  • whose operating results are regularly reviewed by the chief operating decision maker. The term 'chief operating decision maker' is not as such defined in IFRS8 as it refers to a function rather than a title. In some entities the function could be fulfilled by a group of directors rather than an individual and

  • for which discrete financial information is available.

Once an operating segment has been identified the entity needs to report segment information if the segment meets any of the following quantitative thresholds:

  • its reported revenue (external and inter-segment) is 10% or more of the combined revenue, internal and external, of all operating segments

  • its reported profit or loss is 10% or more of the greater, in absolute amount, of (i) the combined profit of all operating segments that did not report a loss and (ii) the combined loss of all operating segments that reported a loss or

  • its assets are 10% or more of the combined assets of all operating segments.

IFRS 8 provides a framework on which to base the reported disclosures.

  1. Entities are required to provide general information on such matters as how the reportable segments are identified and the types of products or services from which each reportable segment derives its revenue.

  2. Entities are required to report a measure of profit or loss and total assets for each reportable segment. Both should be based on the information provided to the chief operating decision maker. If the chief operating decision maker is regularly provided with information on liabilities for its operating segments then these liabilities should also be reported on a segment basis

IFRS 8 specifies disclosures that are needed regarding profit or loss and assets where the amounts are included in the measure of profit or loss and total assets:

  • Revenues - internal and external.

  • Interest revenues and interest expense. These must not be netted off unless the majority of a segment's revenues are from interest and the chief operating decision maker assesses the performance of the segment based on net interest revenue.

  • Depreciation and amortization.

  • Material items of income and expense disclosed separately.

  • Share of profit after tax of, and carrying value of investment in, entities accounted for under the equity method.

  • Material non-cash items other than depreciation and amortization.

  • The amount of additions to non-current assets other than financial instruments, deferred tax assets, post-employment benefit assets and rights arising under insurance contracts.

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