Clarifications to IFRS 8 Operating Segments arising from the post-implementation review — Two sweep issues: consistent information about reportable segments and increasing the number of line items — Agenda paper 27

Background

The Staff is in the process of drafting the ED of the proposed amendments to IFRS 8 in response to the feedback received in the post-implementation review (‘PIR’) of IFRS 8. The purpose of this session is to discuss two issues that surfaced during the course of drafting.

Issues and staff analysis

Consistent identification of reportable segments: The original proposed amendments merely remind preparers of the benefits of consistency between the management commentary and the operating segment disclosures — there is no requirement to mandate such consistency. The Staff believes that in order to address the concerns raised in the PIR, and in light of the fact that the management commentary falls outside of the ambit of IFRS Standards, an entity should be required to explain in the financial statements any differences between the reported segments included in the financial statements and those included in the management commentary.

Increasing the number of reported line items: The Staff identified the following issues during drafting:

1. Is it permissible for segment information to include additional information that is not reviewed by or regularly provided to the chief operating decision maker (‘CODM’)?
2. Should an entity be permitted or required to disclose such additional information if it helps to meet the core principle of IFRS 8?

The Staff believes that IFRS 8 sets out the minimum requirements needed to meet the core principle of the Standard and that an entity may include additional information that is not reviewed by or regularly provided to the CODM if such disclosure helps to meet the core principle of IFRS 8. Nevertheless, as the disclosure requirements of IFRS 8 are based on the management approach, requiring an entity to disclose information not reviewed by the CODM would be a departure from this approach.

Staff recommendation

The Staff recommends that the Board amend IFRS 8 to:

1. Require an entity to explain why the reported segments in the financial statements differ from those included in the management commentary; and
2. State that an entity can disclose additional information about its reportable segments if this helps to meet the core principle of IFRS 8, even if this information is not reviewed by or otherwise regularly provided to the CODM.