رِّب ِزْد ِني ِع ْلمًا
FINANCIAL ACCOUNTING
IFRS 8 : Operating Segments
Study Methodology & Class Discipline
• Ensure you attend class with A PEN, A NOTEBOOK AND A CALCULATOR.
• At IBA we follow Blended Learning Methodology, we will make use of online
resources available like videos, MOOCs, etc as a part of our learning.
• Concepts will be thoroughly explained. If you have any questions, please do not
hesitate to ask.
• Some numerical problems may be solved in the class but the responsibility of
attempting remaining exercises and problems rests with the students
• In Accounting, PRACTICE is essential to gauge the concepts clearly.
• You will NOT be allowed to use phones and/or laptops during the class.
• Attendance can be taken at anytime during the class.
• You are NOT allowed to leave the class after the attendance has been taken.
UNDERSTANDING SEGMENT REPORTING
Segment reporting breaks down the operations of a company into manageable
pieces, or segments. Public companies must then record detailed financial
statements for each operating segment. The goal is to increase transparency for
creditors and investors, especially regarding the company’s most important
operating units.
CORE PRINCIPLE
An entity is required to disclose information to enable users of its financial
statements to evaluate the nature and financial effects of the business
activities in which it engages and the economic environments in which it
operates.
SCOPE
IFRS 8 applies to the annual and interim financial statements of an entity. It
applies to the separate or individual financial statements of an entity and to
the consolidated financial statements of a group with a parent:
• Whose debt or equity instruments are traded in a public market; or
• That files, or is in the process of filing, its financial statements with a
securities commission or other regulatory organization for the purpose of
issuing any class of instruments in a public market.
OPERATING SEGMENTS
An operating segment is a component of an entity:
• That engages in business activities from which it may earn revenues and
incur expenses
• Whose operating results are regularly reviewed by the entity’s chief
operating decision maker (CODM) to make decisions about resources to
be allocated to the segment and assess its performance
• For which discrete financial information is available
REPORTABLE SEGMENTS
Information is required to be disclosed separately about each identified
operating segment and aggregated operating segments that exceed the
quantitative thresholds.
AGGREGATED OPERATING SEGMENTS
Two or more operating segments may be aggregated if the segments are
similar in each of the following respects:
• The nature of the products and services
• The nature of the production processes
• The type or class of customer for their products and services
• The methods used to distribute their products or provide their services
• The nature of the regulatory environment.
QUANTITATIVE THRESHOLDS
• Information is required to be disclosed separately about an operating segment that meets any of the
following quantitative thresholds:
Its reported revenue, including both sales to external customers and intersegment sales or transfers,
is 10 per cent or more of the combined revenue, internal and external, of all operating segments
The absolute amount of its reported profit or loss is 10 per cent or more of the greater, in absolute
amount, of:
i. The combined reported profit of all operating segments that did not report a loss; and
ii. The combined reported loss of all operating segments that reported a loss.
Its assets are 10 per cent or more of the combined assets of all operating segments.
QUANTITATIVE THRESHOLDS
• If the total external revenue reported by operating segments
constitutes less than 75% of the total revenue, additional
operating segments shall be identified as reportable segments
until at least 75% of the entity’s revenue is included in reportable
segments.
SAMPLES
• Unilever Pakistan
• Engro Corporation
• Friesland Campina
