IFRS 8 — Operating Segments
IFRS 8 Operating Segments requires particular classes of entities (essentially those with publicly traded securities) to disclose information about their operating segments, products and services, the geographical areas in which they operate, and their major customers. Information is based on internal management reports, both in the identification of operating segments and measurement of disclosed segment information.
IFRS 8 was issued in November 2006 and applies to annual periods beginning on or after 1 January 2009.
History of IFRS 8
|19 January 2006||ED 8 Operating Segments issued||Comment deadline 19 May 2006. (IASB press release)|
|30 November 2006||IFRS 8 Operating Segments issued||Effective for annual periods beginning on or after 1 January 2009, superseding IAS 14 Segment Reporting|
|16 April 2009||Amended by Annual Improvements to IFRSs 2009 (disclosures of segment assets)||Effective for annual periods beginning on or after 1 January 2010|
|18 July 2013||Report and Feedback Statement Post-implementation Review: IFRS 8 Operating Segments published||Areas for potential improvement and amendment will be considered through the IASB's normal processes|
Amendments under consideration by IASB
- The IASB may consider amendments in response to its post-implementation review of IFRS 8
Summary of IFRS 8
Special Edition IAS Plus Newsletter
Deloitte has published a Special Edition IAS Plus Newsletter (PDF 113k) explaining the requirements of IFRS 8 and what has changed from IAS 14.
Overview of IFRS 8
IFRS 8 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 (consolidated) financial statements with a securities commission or other regulatory organisation for the purpose of issuing any class of instruments in a public market [IFRS 8.2]
However, when both separate and consolidated financial statements for the parent are presented in a single financial report, segment information need be presented only on the basis of the consolidated financial statements [IFRS 8.4]
IFRS 8 defines an operating segment as follows. An operating segment is a component of an entity: [IFRS 8.2]
- that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity)
- whose operating results are reviewed regularly by the entity's chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance and
- for which discrete financial information is available
IFRS 8 requires an entity to report financial and descriptive information about its reportable segments. Reportable segments are operating segments or aggregations of operating segments that meet specified criteria: [IFRS 8.13]
- its reported revenue, from both external customers and intersegment sales or transfers, is 10 per cent or more of the combined revenue, internal and external, of all operating segments; or
- the absolute measure 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; or
- its assets are 10 per cent or more of the combined assets of all operating segments.
If the total external revenue reported by operating segments constitutes less than 75 per cent of the entity's revenue, additional operating segments must be identified as reportable segments (even if they do not meet the quantitative thresholds set out above) until at least 75 per cent of the entity's revenue is included in reportable segments. [IFRS 8.15]
Required disclosures include:
- general information about how the entity identified its operating segments and the types of products and services from which each operating segment derives its revenues [IFRS 8.22]
- information about the reported segment profit or loss, including certain specified revenues and expenses included in segment profit or loss, segment assets and segment liabilities, and the basis of measurement [IFRS 8.21(a) and 27]
- reconciliations of the totals of segment revenues, reported segment profit or loss, segment assets, segment liabilities and other material items to corresponding items in the entity's financial statements [IFRS 8.21(b) and 28]
- some entity-wide disclosures that are required even when an entity has only one reportable segment, including information about each product and service or groups of products and services [IFRS 8.32]
- analyses of revenues and certain non-current assets by geographical area – with an expanded requirement to disclose revenues/assets by individual foreign country (if material), irrespective of the identification of operating segments [IFRS 8.33]
- information about transactions with major customers [IFRS 8.34]
Considerable segment information is required at interim reporting dates by IAS 34.
Remaining differences with US GAAP
The remaining differences with US GAAP (SFAS 131) are listed in IFRS 8.BC60.