IFRS 8 | Operating Segments

1

Core Principle

An entity shall disclose information to enable users of its 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.

2

Scope

This IFRS applies to the separate or individual financial statements of an entity and the consolidated financial statements of a group with a parent: (a) whose debt or equity instruments are traded in a public market; or (b) 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.

3

Voluntary Disclosure

If an entity that is not required to apply this IFRS chooses to disclose information about segments that does not comply with this IFRS, it shall not describe the information as segment information.

4

Consolidated vs Separate

If a financial report contains both consolidated financial statements and the parent's separate financial statements, segment information is required only in the consolidated financial statements.

5

Operating Segment Definition

An operating segment is a component of an entity: that engages in business activities from which it may earn revenues and incur expenses; whose operating results are regularly reviewed by the entity's chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance; and for which discrete financial information is available.

6

Start-up Operations

An operating segment may engage in business activities for which it has yet to earn revenues, for example, start-up operations may be operating segments before earning revenues.

7

Exclusions

Not every part of an entity is necessarily an operating segment. Corporate headquarters or functional departments that do not earn revenues (or earn incidental revenues) are not operating segments. Post-employment benefit plans are not operating segments.

8

CODM

The term chief operating decision maker identifies a function, not necessarily a manager with a specific title. That function is to allocate resources to and assess the performance of the operating segments of an entity.

9

Segment Manager

Generally, an operating segment has a segment manager who is directly accountable to and maintains regular contact with the chief operating decision maker. A single manager may be the segment manager for more than one operating segment.

10

Matrix Organisation

If the characteristics of an operating segment apply to more than one set of components (e.g. matrix organisation where managers are responsible for products and geography), the entity shall determine which set constitutes the operating segments by reference to the core principle.

11

Reportable Segments

An entity shall report separately information about each operating segment that has been identified or results from aggregation and exceeds the quantitative thresholds.

12

Aggregation Criteria

Two or more operating segments may be aggregated into a single operating segment if aggregation is consistent with the core principle, they have similar economic characteristics, and are similar in: (a) the nature of the products and services; (b) the nature of the production processes; (c) the type or class of customer; (d) the methods used to distribute products; and (e) the regulatory environment (if applicable).

13

Quantitative Thresholds

An entity shall report separately information about an operating segment that meets any of the following quantitative thresholds: Revenue is 10% or more of combined revenue; Profit/Loss is 10% or more of the greater of combined profit or combined loss; Assets are 10% or more of combined assets.

14

Management Discretion

Operating segments that do not meet the quantitative thresholds may be considered reportable if management believes the information would be useful to users.

15

Combining Small Segments

Information about operating segments that do not meet the quantitative thresholds may be combined to produce a reportable segment only if they have similar economic characteristics and share a majority of the aggregation criteria.

16

75% Limit

If the total external revenue reported by operating segments constitutes less than 75 per cent of the entity's revenue, additional operating segments shall be identified as reportable segments until at least 75 per cent of revenue is included.

17

All Other Segments

Information about other business activities and operating segments that are not reportable shall be combined and disclosed in an all other segments category.

18

Continuing Significance

If a segment was reportable in the preceding period and is of continuing significance, information about that segment shall continue to be reported separately in the current period even if it no longer meets the criteria.

19

Number of Segments

There may be a practical limit to the number of reportable segments. If the number increases above ten, the entity should consider whether a practical limit has been reached.

20

Disclosure Principle

An entity shall disclose information to enable users to evaluate the nature and financial effects of the business activities and economic environments.

21

Required Disclosures

An entity shall disclose general information, information about reported segment profit or loss (including specified revenues and expenses), segment assets, segment liabilities, and reconciliations of totals to entity amounts.

22

General Information

Disclosures include: (a) factors used to identify reportable segments (basis of organisation); (b) judgements made in applying aggregation criteria; and (c) types of products and services from which each segment derives its revenues.

23

Profit or Loss Items

An entity shall report a measure of profit or loss for each reportable segment. It shall also disclose specific items if included in the measure reviewed by the CODM or regularly provided to the CODM, such as revenue from external customers, intersegment revenue, interest revenue/expense, depreciation/amortisation, material items of income/expense, equity method interests, and income tax.

24

Asset Items

An entity shall disclose specified amounts (e.g. investment in associates, additions to non-current assets) if included in the measure of segment assets reviewed by the CODM or regularly provided to the CODM.

25

Measurement Basis

The amount of each segment item reported shall be the measure reported to the chief operating decision maker for the purposes of making decisions about allocating resources and assessing performance.

27

Measurement Explanation

An entity shall provide an explanation of the measurements of segment profit or loss, segment assets, and segment liabilities, including the basis of accounting for intersegment transactions and the nature of differences between segment measures and entity measures.

28

Reconciliations

An entity shall provide reconciliations of the total of the reportable segments' revenues, profit or loss, assets, liabilities, and other material items to the corresponding amounts for the entity.

29

Restatement

If an entity changes the structure of its internal organisation causing the composition of reportable segments to change, corresponding information for earlier periods shall be restated unless unavailable or cost is excessive.

30

Change without Restatement

If segment information for earlier periods is not restated following a change in structure, the entity shall disclose segment information for the current period on both the old basis and the new basis of segmentation, unless unavailable or cost is excessive.

31

Entity-Wide Disclosures

Paragraphs 32-34 apply to all entities subject to this IFRS, including those with a single reportable segment. Information is required only if not provided as part of the reportable segment information.

32

Products and Services

An entity shall report the revenues from external customers for each product and service, or each group of similar products and services.

33

Geographical Areas

An entity shall report revenues from external customers attributed to the entity's country of domicile and all foreign countries in total. It shall also report non-current assets located in the country of domicile and all foreign countries in total. Material amounts for individual foreign countries shall be disclosed separately.

34

Major Customers

An entity shall provide information about the extent of its reliance on its major customers. If revenues from a single external customer amount to 10 per cent or more of entity revenues, that fact shall be disclosed along with the total amount and the identity of the segment reporting the revenues.

35

Effective Date

An entity shall apply this IFRS in its annual financial statements for periods beginning on or after 1 January 2009.

37

Withdrawal of IAS 14

This IFRS supersedes IAS 14 Segment Reporting.

Appendix A

Definitions

Operating segment: An operating segment is a component of an entity: that engages in business activities from which it may earn revenues and incur expenses; whose operating results are regularly reviewed by the entity's chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance; and for which discrete financial information is available.