4.6 Segment reporting

Question 1

What is segment reporting?

Answer 1

Financial information on the performance position of the key operating units of a company to users of the financial statements.

Question 2

Which standards defines segment reporting?

Answer 2

IFRS 8

Question 3

Segment reporting works on a management model - what is meant by this?

Answer 3

Segment analysis is reported as it would be internally to help management’s decision making.

Question 4

How does IFRS define an operating segment of an entity?

Answer 4

As a business component:

• from which it may earn revenue and incur expenses
• whose results are regularly reviewed by the entity’s chief operating decision maker
• for which discrete financial information is available

Question 5

IFRS 8 requires operating segments to be reported and presented separately if they exceed which quantitative thresholds?

Answer 5

1 Reported revenue is more than 10% of gross
2 Absolute profit is loss is 10% or more of the greater
3 Segments assets are 10% or more of combined assets of all segments

Question 6

If the combined reportable segments amount to less than 75% of revenue, what action should be taken?

Answer 6

Additional segments should be reported (even if less than 10%) until the 75% threshold is reached.

Question 7

What disclosures must be made about operating segments?

Answer 7

1 How segments were identified
2 Their general nature
3 How information is presented to the chief officer
4 Reconciliations between segment report and financial statements
5 any change in internal structure between new and old segment information

Question 8

What process should be followed when accounting for segments?

Answer 8

1 Identify business segments
2 Calculate total revenue for each and identify any exceeding 10%
3 Identify absolute profit for each and identify any exceeding 10%
3 Identify total assets for each and identify any exceeding 10%
4 If total of the above does not exceed 75%, add other segments to reach this total.