Reporting As Per IFRS 8

An Introduction IFRS 8 Operating Segments mandates certain classes of organizations (primarily those with publicly traded shares) to publish information about their operating segments, products and services, geographical areas, and prominent clients. Information is derived from internal management reports for both the identification of operating segments and the measurement of reported segment data. The IFRS 8 segment was published in November 2006 and applies to yearly periods beginning after January 1, 2009.

?Scope This standard applies to any company whose debt or equity securities are traded on a public market or that seeks to issue any instrument on a public market under IFRS 8. If they refer to their disclosures as 'segment information,' other companies must comply with IFRS 8 when disclosing segment information.

?Identification of Segment Operations?

An operating segment is a part of an entity, according to IFRS 8:

?●??????That is actively involved in commercial activities that generate income

?●??????Whose operational results are scrutinized regularly by the person in charge of making operational decisions? In IFRS8, the term "chief operating decision maker" does not refer to a title as such but rather to a function. In some organizations, a board of directors may be able to perform the same duty as a single director.

?●??????It can be tracked down using specific financial data.

?This means that not every part of a company is an operating segment by this definition. For example, according to IFRS 8, a company's headquarters, which may generate no or only incidental revenue, would not be considered an operating segment.

?Critics say the "management approach" leaves segment designation up to the company's discretion, which makes it difficult to compare other companies' finances.

?Identification of reportable segments

?Whenever an operating segment has been determined, the company must disclose segment information if it fulfills any of the quantitative standards listed below:

?●??????Its reported revenue (inter-segment and external) amounts to 10 percent or more of the total internal and external revenue generated by all operational segments combined.

?●??????Its assets account for 10% or more of the total assets of all operating segments.

?According to IFRS 8, if several segments have equivalent economic characteristics, they may be combined into a single operating segment, and the size criterion can evaluate their combined size.

?Entity-wide disclosures

?IFRS 8 requires firms to report revenue based on the "class of business" and the geographic location of the entity. Additionally, entities must give information on non-current assets on a regional basis instead of on a "class of business basis."

?If revenues from a single external customer account for 10% or more of the entity's total revenue, the entity must disclose that fact, as well as:

?●??????The total revenue generated by each customer (although the name is not needed) and

●??????the revenue-reporting segment or segments

?Conclusion

?According to the report's findings, rapid implementation of IFRS 8 would reduce the ambiguity over the handling of financial reporting for the financial year ending on December 31, 2007. Additionally, it would aid the EU's larger objective of accepting IFRSs in all nations, including the United States, without the need for reconciliation, which would be a significant benefit.

Written By CA Karan Ranka