Segment Reporting

Question 1

Outline the purpose of IFRS 8 - Segment Reporting

Answer 1

The objective of segment reporting is to help financial statement users better understand the company’s performance, better assess the company’s prospects for future cash flows, and make more informed judgments about the company as a whole.

Question 2

What is the definition of an operating segment

Answer 2

A segment that engages in business activities with separate information available which is regularly reviewed by the chief decision makers

Revenue, Assets or Profit 10% or More

75%+ of Entities Revenues to be reported (Can be aggregated)

Question 3

What are the rules on aggregating segments?

Answer 3

Similar economic features:

Need to have Similar:
Service
Customers
Manufacturing process
Distribution
Regulation

Question 4

What financial metrics should we report at an operating segment level?

Answer 4

Revenue
Profit
Taxes
Interest
Depreciation / Amortisation
Assets & Liabilities

Question 5

Main advantages / disadvantages of segment reporting

Answer 5

Advantage
Easy to prepare (reflect management reporting)
Clearer understanding of managements view of the business and strategy

Disadvantages
Segmenting can be subjective
May result in information overland