IFRS 8 Operating Segments [Download this PPT as PDF File]


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 & the ECONOMIC ENVIRONMENT in which it operates.


•1 •Identify the CODM

•2 •Identify the Operating Segments

•3 •Determine the Reportable Segments

•4 •Disclose the Required Information

IDENTIFY The Chief Operating Decision Maker (CODM)

CODM is a FUNCTION, not a DESIGNATION. CODM can be an INDIVIDUAL or a GROUP of Individuals. CODM FUNCTION is to Allocates the Resources of the Entity  and Assess the performance of the Operating Segments of the Entity.

Operating Segments is a Component of an Entity.

•From which it MAY EARN REVENUES and INCUR EXPENSES (including Intra-Group Revenue and Expenses)

•Whose operating results are REVIEWED regularly by the Entity’s CODM – to assess performance and decide about resource allocation.

•For which DISCRETE Financial Information is available

Specific Example

Yes – Startup Operations – before Earning Revenues

No – Corporate HQ’s and Functional Departments (say Internal Audit) not earning Revenues  & Post-Employment Benefits Plans

Determining Reportable Segments


Ø Aggregation is consistent with the Core Principle

Ø Segments have similar economic characteristics

Ø Segments similar on each of the Five Specified Criteria

1. Nature of Products and Services

2. Nature of the Production Processes

3. Customer type or class

4. Distribution Methods

5. Nature of Regulatory Environment

Quantitative Thresholds

A Segment is REPORTABLE if MAJORITY of its REVENUE is from Sales to External Customers.

• Segment Revenue > 10% of Revenue from all Segments (Revenue = External + Internal)

• Segment Results > 10% of the Combined Results

• Segments Assets > 10% of the Total assets of all Segments

Determining Reportable Segments

•Identify each Operating Segment that exceed the Quantitative Threshold


•any operating segments that meet all aggregation criteria

•Remaining operating segments below Quantitative threshold with each other if the majority of aggregation criteria met

•If Reportable Segments are less than 75% of Revenue, add more reportable segments.

Management BELIEVEs that the Information is Useful for the Users Can be disclosed
in Current Year but was disclosed in Preceding Period Can be disclosed if the Management judges that the Information is of Continuing Significance
in Current Year but was Not disclosed in Preceding Period Disclose Restate prior period information (unless the necessary information is not available and cost to develop it would be excessive)


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 & the ECONOMIC ENVIRONMENT in which it operates.

What is This Information ?

An Entity shall disclose the following for each period for which a Statement of Comprehensive Income is presented: a. General Information b. Information about Segment Revenues, Segment Profit or Loss and Segment Assets and Liabilities and basis of Measurement. c. Reconciliation Statement

Disclosure – general information a. Factors used to IDENTIFY the Entity’s Reportable Segments (viz., Nature of Products & Services, Nature of Production & Distribution Processes, Geographical Areas, Regulatory Environment, or a Combination of these Factors). b. The Types of Products and Services from which each Reportable Segment derives its Revenue.

Disclosure – information about Segment (revenues, p & l and assets & liabilities) For each Reporting Segment, Entity shall report :

Ø Segment Profit or Loss

Ø Total Segment Assets

Ø Segment Liabilities (if reviewed by CODM)

For each Reporting Segment, Entity shall report (if reviewed by CODM or otherwise Information is provided to CODM, even if not included in measure of P & L)  :

Ø Revenues from External Customers

Ø Revenue from Intra-Group Transactions with Other Operating Segments

Ø Interest Revenue & Interest Expenses (separately)

Ø Depreciation and Amortisation

Ø Material Items of Income and Expenses

Ø Entity’s interest in P&L of Associates / JV accounted for under the Equity Method

ØIncome tax expense

Ø Material non-cash items other than Depreciation & Amortisation.

Disclosure – Reconciliation

Total of Reportable Segments

^ Revenues to Entity’s Revenue

^ P & L to Entity’s P & L

^ Assets to Entity’s Assets

^ Liabilities to Entity’s Liabilities (if Reported)

^ Amounts for Every Material Item of Information disclosed to corresponding amount for the entity.

Entity Wide Disclosures

All entities subject to this IFRS including Entities that have a single reporting segment shall provide Information about ::

* Products and Services

* Geographical Areas

* Major Customers

The amounts reported shall be based on the financial information that is used to produce the entity’s financial statements. If Any Information is Not Available and Cost to develop it would be excessive, the fact should be disclosed.

Information About Products & Services

Revenues from External Customers for each product & services (or group of products and services).

Information About Geographical Areas

* Revenues from External Customers &

* Non-current Assets (other than Financial Instruments, Deferred Tax Assets and Rights under Insurance Contracts)

i.     Attributed to the Entity’s country of Domicile

ii.     Attributed to the all Foreign Countries from which the Entity derives Revenue or holds Assets. If revenues from External Customers or Assets attributed to an Individual Foreign Country are Material, the same shall be disclosed separately.

Information About Major Customers

# Extent of its Reliance on Major Customers

# If Revenues from transaction with single external customer amount to 10% or more of the Entity’s Revenue, the Entity shall Disclose:

Ø the Fact;

Ø the total amount of Revenues from each such Customer;

Ø the Identity of the Segment(s) reporting such Revenue

Ø Need NOT Disclose – Identity of the Customer A group of Entities known to the Reporting Entity to be under common control shall be considered a single customer.

Government (and entities known to the Reporting Entity to be under the control of that Government shall be considered a single customer.

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