"IFRS 8 Operating Segments"
Bilal Ahmad
I Help Fractional CFOs Scale with LinkedIn Leads | Fractional CFO for Startups
Key points and objectives of IFRS 8 include:
1. Identification of Operating Segments: IFRS 8 requires entities to identify their operating segments based on how the chief operating decision-maker, typically the CEO or equivalent, makes decisions about resource allocation and assesses performance.
2. Reportable Segments: An operating segment is considered reportable if it meets certain quantitative thresholds, such as meeting a specified revenue threshold or being a significant part of the entity's business. Reportable segments require separate disclosure of financial information.
3. Segment Information: Entities are required to disclose specific financial information for each reportable segment, including revenue, operating profit or loss, assets, and liabilities. This information helps users of financial statements assess the financial performance and position of each segment.
4. Aggregation of Segments: In some cases, segments may be aggregated for reporting purposes if they have similar economic characteristics, similar products and services, and meet other specified criteria.
5. Geographical Information: IFRS 8 also requires entities to disclose information about their geographical segments if they operate in different geographical areas and if the information is regularly provided to the chief operating decision-maker.
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6. Segment Disclosures: The standard provides guidance on the format and content of segment disclosures, ensuring consistency and comparability across entities.
7. Management Approach: IFRS 8 emphasizes the importance of the management approach in segment reporting, aligning the reportable segments with the way management views and manages the business.
8. Frequency of Reporting: Segment information should be reported on a regular basis, typically annually. Interim financial statements should also include segment information if it is regularly reviewed by the chief operating decision-maker.
The primary objective of IFRS 8 is to improve the transparency and relevance of financial reporting by requiring entities to provide detailed information about their operating segments. This information helps users of financial statements, such as investors and analysts, better understand how an entity's business is structured and how it generates revenue and incurs expenses.
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