IFRS-8.pptx (IFRS -OPERATING SEGMENTS) ACC.

IFRS 13

1. IFRS 8 OPERATING SEGMENTS

2. GROUP MEMBERS

3. International financial reporting standards (IFRS) = global accounting rules IFRS 8 issued in nov 2006, effective from jan 2009 Replaced IAS 14: segment reporting Goal: improve relevance & transparency of segment info Uses management approach – based on internal decision-making INTRODUCTION TO IFRS 8

4. Disclose info to understand: Based on internal reporting (CEO/CFO view) Focus: Relevant, transparent, segment-specific info Helps stakeholders assess performance, risk, and strategy Business activities Economic environments CORE PRINCIPLE OF IFRS 8

5. SCOPE OF IFRS 8 1. Applicable Entities Entities with publicly traded debt or equity Traded on domestic or foreign stock exchanges Includes over-the-counter (OTC) markets Entities filing or planning to file with a securities commission Preparing to issue any class of instruments in a public market 2. Type of Financial Statements Applies to:. Separate / individual financial statements Consolidated financial statements of a group with a listed parent

6. SCOPE OF IFRS 8 3. Restriction on Use of “Segment Information” If not applying IFRS 8 properly, → Cannot label segment data as “segment information” 4. Consolidated Reporting Only If both separate and consolidated FS are prepared, →Segment reporting required only in the consolidated FS

7. OPERATING SEGMENTS What is an operating segment? Not Every Part is an Operating Segment Engages in business activities Reviewed by Chief Operating Decision Maker (CODM) Discrete financial information available Corporate headquarters Support departments 5. 6.

8. OPERATING SEGMENTS Chief Operating Decision Maker Identifying Segments CODM = function, not title Usually CEO, COO, or executive team Look at reports to CODM Consider managers and activities 7. 8.

9. OPERATING SEGMENTS Segment Manager Matrix Organization Responsible for performance Reports to CODM One manager can handle multiple segments Product-based vs geography-based Both sets reviewed by CODM 9. 10.

10. REPORTABLE SEGMENTS: What are reportable segments in IFRS 8? Information Must be reported separately if: 1. Identified as per Paras 5-10 2. Meets thresholds in Para 13 (10% of revenue, profit/loss, or assets) Additional guidance (Paras 14-19) ensures relevant segments are not missed. 11.

11. AGGREGATION CRITERIA What is aggregation in IFRS 8? Segments may be grouped if they: Share similar economic characteristics Match in these five areas: Product/service type Production processes Customer types Distribution methods Regulatory environments 12.

12. When a Segment should be Reported separately Revenue condition Profit or loss Condition Assets Condition Combine Small Segnemts 75% Revenue Role All other Segments Previously reported segment still Important New Reportable Segment show Prior year’s Data Too many Segment? QUANTITATIVE THRESHOLDS

13. Definition of Disclosure Importance of Overview of requirement Types of General Information required DISCLOSURE INTRODUCTION TO DISCLOSURE GENERAL INFORMATION OF DISCLOSURE

14. Components of segment reporting Importance of report Segments of revenue Segments of expenses Segments of Assets and Liabilities Special Consideration SEGMENT PROFIT OR LOSS REPORTING OVERVIEW OF SEGMENTS

15. Types of measurement Impact on financial statement Importance of reconciliation Stakeholder trust Effects on stakeholders Strategic Benefits BASIS OF MEASUREMENTS FOR SEGMENT REPORTING RECONCILIATION OF SEGMENT DATA IMPLICATIONS OF DISCLOSURE AND REPORTING

16. GENERAL INFORMATION FORMATION ABOUT PROFIT OR LOSS, ASSETS, AND LIABILITIES The basis of organization. The types of products/services that generate revenue for each segment. Profit or loss measures. Assets and liabilities if reviewed by the Chief Operating Decision Maker (CODM). Revenue from customers and inter-segment sales Interest income/expense.

17. Investments in associates/joint ventures using equity method. Additions to non-current assets (excluding financial instruments, deferred taxes, employee benefit assets, or insurance rights). NON-CURRENT ASSETS & INVESTMENTS

18. Measurement of Segment profit or loss Measurement of Segment Assets and liabilities How segments do business with each other Any differences in accounting Any changes from last year Real life example: “For example, Nestlé reports segments by regions and products. They use Trading Operating Profit as the main measure. WHAT IS SEGMENT REPORTING REQUIRED DISCLOSURES:

19. RECONCILIATION RESTATEMENT Reconciliation under IFRS 8 Why reconciliation is necessary? Restatement under IFRS 8 Why restatement is required?

20. Entity-wide disclosures, according to IFRS 8, are specific disclosures about an entity's overall operations, required even for companies with a single reportable segment. 1. Information about products and services An entity shall report the revenue from external cusromers for each product and services or a group of products and services. ENTITY-WIDE DISCLOSURE

21. 2. Information about geographical areas Revenues from external customers Attributed to entity's country of domicile Attributed to all foreign countries Non-current assets Located in entity's country of domicile Located in all foreign countries 3. Information about major customers Report if revenue with single customer ≥ 10% of total revenues ENTITY-WIDE DISCLOSURE

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