IFRS 8: Operating Segments
Kaleem Ullah Tipu ACA
Manager - I Tax at KPMG | ACA | FCCA | LL.B | VAT | Corporate Tax | Life Member - Lahore Tax Bar Association
IFRS 8 "Operating Segments" is an international financial reporting standard that sets out requirements for the disclosure of information about an entity's operating segments. The standard primarily aims to enhance the quality of information available to stakeholders about the different components of an entity's business and how they perform. Key features of IFRS 8 include:
1. Operating Segments Identification: Operating segments are components of an entity about which separate financial information is available and evaluated regularly by the chief operating decision maker (CODM) in deciding how to allocate resources and assess performance. Typically, an operating segment is a business unit or division within the entity.
2. Management Approach: IFRS 8 requires that segments be identified and financial information be reported on the same basis as that used internally for evaluating performance and allocating resources. This is known as the 'management approach.'
3. Reportable Segments: Not all operating segments need to be reported separately. An operating segment becomes reportable based on quantitative thresholds relating to its revenue, profit or loss, and assets.
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4. Segment Reporting Disclosures: The standard requires entities to disclose specific information about their reportable segments, including general information about how the segment was identified, types of products and services from which each reportable segment derives its revenues, and information about the profit or loss for each reportable segment.
5. Measurement of Segment Profit or Loss and Assets: The amounts reported for each operating segment should be the measure reported to the CODM for the purposes of making decisions about allocating resources to the segment and assessing its performance.
6. Reconciliations: IFRS 8 mandates reconciliations of the total reportable segments' revenues, total profit or loss, total assets, and other significant items to corresponding amounts in the entity’s financial statements.
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