Lecture Notes: IFRS 8 - Operating Segments
Core Principle Process
• Objective: Disclose information to help users 1. Identify operating segments exceeding quantitative
evaluate the nature and financial effects of business thresholds
activities and economic environments. 2. Aggregate segments meeting all criteria
Application Summary 3. If reportable segments <75% of revenue, add more
1. Identify the Chief Operating Decision Maker reportable segments
(CODM) Optional:
2. Determine Reportable Segments • Non-quantitative threshold segments may be
3. Disclose Required Information disclosed if management believes it useful or of
4. Identify Operating Segment continuing significance
Chief Operating Decision Maker (CODM) Disclosure Requirements
Definition: CODM is a function, not a designation; can be an ➢ General Information:
individual or a group. • Factors identifying reportable segments
Role: (products, services, production, distribution,
• Allocates resources geographical areas, regulatory environment)
• Assesses performance of operating segments • Types of products/services deriving revenue
Operating Segments ➢ Segment Information:
• Profit or loss
Criteria: • Total assets
• Earns revenues and incurs expenses (including intra- • Liabilities (if reviewed by CODM)
group) ➢ Reconciliation:
• Regularly reviewed by CODM for performance • Reportable segments to entity's totals
assessment and resource allocation (revenues, P&L, assets, liabilities)
• Discrete financial information available • Material items to corresponding entity
amounts
Specific Examples
• Yes: Startup operations (before earning revenue) Entity-wide Disclosures
• No: Corporate HQ and functional departments not All entities, including those with a single segment, must
earning revenue, post-employment benefit plans provide:
1. Information about products and services
2. Geographical areas
Determining Reportable Segments 3. Major customers
1. Aggregation Criteria:
• Consistent with core principle 1. Product/Service Information:
• Similar economic characteristics • Revenues from external customers for each
• Similar in: product/service
✓ Nature of products/services 2. Geographical Information:
✓ Production processes • Revenues from external customers and non-current
✓ Customer type/class assets attributed to domicile and foreign countries
✓ Distribution methods • Disclose material revenues/assets from individual
✓ Regulatory environment foreign countries
3. Major Customers:
2. Quantitative Thresholds: • Extent of reliance on major customers
• Segment revenue >10% of total revenue (external + • If a single customer accounts for ≥10% of revenue,
internal) disclose:
• Segment results >10% of combined results • Fact
• Segment assets >10% of total assets • Total revenue from each customer
Prepared By: Neshl Angelisse Balacanta
• Segment reporting the revenue
Key Terms Explained
• CODM: Chief Operating Decision Maker,
responsible for allocating resources and assessing
performance
• Aggregation Criteria: Conditions under which
segments can be combined
• Quantitative Thresholds: Financial benchmarks for
determining reportable segments
• Reconciliation: Aligning segment data with total
entity data
Prepared By: Neshl Angelisse Balacanta
