IFRS 8 Identifying operating segments

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IFRS 8 Identifying operating segments – There are four key steps. Entities will need to:

  1. Identify the Chief Operating Decision Maker (CODM) (group/team/individual).
  2. Identify their business activities (which may not necessarily earn revenue or incur expenses).
  3. Determine whether discrete financial information is available for the business activities.
  4. Determine whether that information is regularly reviewed by the CODM.

Identifying the CODM and the components that are regularly reviewed by the CODM to make decisions can be difficult. It is also important to reassess regularly the identification of the CODM, particularly following a business reorganisation, acquisition or disposal. IFRS 8 Identifying operating segments

IFRS 8 defines an operating segment as a ‘component of an entity that engages in business … Read more

Aggregation disaggregation and materiality

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Aggregation disaggregation and materiality are cornerstones of financial reporting using IFRS. Here is a summary of the financial reporting items that include (mostly) disclosure requirements that relate to these cornerstones. See also Aggregation for an overview of general financial reporting rules in that respect. Aggregation disaggregation and materiality

Fair value measurement

Present additional line items (including by disaggregating the line items listed in IAS 1 54), headings and subtotals in the statement of financial position when such presentation is relevant to an understanding of the entity’s financial position. This may require additional line items when the size, nature or function of an item or aggregation of similar items is such that separate presentation is relevant to Read more

Disclosures subsidiaries and NCI

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Disclosures subsidiaries and NCI – IFRS 12 requires disclosures for each of an entity’s subsidiaries that have material non-controlling interests. Such disclosures assist users when estimating future profit or loss and cash flows (for example, by identifying the assets and liabilities that are held by subsidiaries, risk exposures of particular group entities, and those subsidiaries that have significant cash flows). The disclosures are as follows (new disclosures compared to the previous standard are in bold):

  • The subsidiary’s nameDisclosures subsidiaries and NCI
  • Its principal place of business (and country of incorporation, if different)Disclosures subsidiaries and NCI
  • The proportion of ownership interests held by non-controlling interestsDisclosures subsidiaries and NCI
  • The proportion of voting rights held
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Disclosure for Insurance contracts

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Disclosure for Insurance contracts – The disclosure requirements in IFRS 17 aim to provide users of the financial statements with a basis to assess the effect that contracts within the scope of IFRS 17 have on an entity’s financial position, financial performance and cash flows. Disclosure for Insurance contracts Disclosure for Insurance contracts  Disclosure for Insurance contracts

IFRS 17 requires disclosure of qualitative and quantitative information about [IFRS 17 93]: Disclosure for Insurance contractsDisclosure for Insurance contracts

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Operating segments Matrix structured entities

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Operating segments Matrix structured entities – IFRS 8 10 addresses the issue of matrix structures. It uses the example of an entity where some managers are responsible for product and service lines worldwide, whereas other managers are responsible for specific geographical areas. Operating segments Matrix structured entities

The CODM reviews the operating results of both sets of components, and discrete financial information is available for both. In this situation, the entity should determine which set of components constitutes the operating segments, taking account of what users of the financial statements would need to know in order to evaluate the entity’s business activities and the environment it operates in. Operating segments Matrix structured entities

Matrix-structured entities use judgment … Read more

Disclosure of operating segments

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Disclosure of operating segments – The disclosures regarding operating segments focus on the information that management believes is important when running the business. The disclosure requirements are summarised below.

Information required


General information

  • Factors used to identify the reportable segments. Disclosure of operating segments
  • Types of product/service from which each reportable segment derives its revenue.

Information about the reportable segment; profit or loss, revenue, expenses, assets, liabilities and the basis of measurement

  • A measure of profit or loss and total assets. Disclosure of operating segments
  • A number of specific disclosures, such as revenues from external customers if they are included in segment profit or loss and presented regularly to the CODM. Disclosure of operating segments
  • Explanation
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What are operating segments?

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What are operating segments – Most entities will be able to identify their operating segments easily by reference to the definition. However, when this is not the case, for example if the chief operating decision maker (CODM) uses more than one set of segment information, other factors may enable the operating segments to be identified.

Factors to consider in determining operating segments for a reporting entity are: What are operating segments

  • the nature of the business activities of each component of the entity, the existence of managers responsible for them, and information presented to the board of directors.
  • an operating segment will usually have a segment manager who is directly accountable to, and has regular contact with,
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Consolidated or unconsolidated financial statements

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Consolidated or unconsolidated financial statements – Consolidated financial statements provide information about the assets, liabilities, equity, income and expenses of both the parent and its subsidiaries as a single reporting entity.

That information is useful for existing and potential investors, lenders and other creditors of the parent in their assessment of the prospects for future net cash inflows to the parent. This is because net cash inflows to the parent include distributions to the parent from its subsidiaries, and those distributions depend on net cash inflows to the subsidiaries.

Consolidated financial statements are not designed to provide separate information about the assets, liabilities, equity, income and expenses of any particular subsidiary. A subsidiary’s own financial statements are … Read more

Reporting period

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A reporting period is the span of time covered by a set of financial statements, normally a year from 1 January Year to 31 December Year. The reporting period also called accounting period can also be for a interim period either for a month or quarter. Reporting entities consistently use the same reporting periods from year to year, so that their financial statements can be compared to the ones produced for prior years.

The reporting period is stated in the header of a financial report. For example, the income statement header might read, “for the year ended 31 December Year.” while the balance sheet header might read “as of 31 December Year.”

Some reporting entities use a … Read more