The staff presented a paper addressing the two issues raised by Board members on the pre-ballot draft expected to become IFRS 8 Operating Segments.

Disclosure of information about major customers - entities under common state control

Paragraph 33 of ED 8 Operating Segments stated that an entity shall provide information about the extent of its reliance on major customers. Thus, if revenues from transactions with a single external customer exceed 10 per cent of an entity's revenues, the entity shall disclose that fact. In this connection a group of entities known to a reporting entity to be under common control shall be considered a single customer, and a national government, a local government, or a foreign government each shall be considered a single customer.

Some respondents to the ED argued that difficulties could arise in relation to entities that are state-controlled. They suggested that a group of entities under common control should be treated as a single customer for this purpose only when prices or other material terms of trade are negotiated on a group basis.

The staff agreed in principle with this comment, and the amendment is reflected in paragraph 34 of the pre-ballot draft of IFRS 8.

The staff also noted that in September 2006 the Board agreed that the wording in ED 8 should be consistent with that used for a similar issue arising on IAS 24 Related Party Disclosures. At its September 2006, meeting the Board tentatively decided that when an entity qualifies as a related party of another entity simply because of the existence of common control from the State, IAS 24 should provide relief from the requirement to disclose related party transactions between those two commonly controlled entities.

In comments on the pre-ballot draft, two Board members argued that the amendment reflected in paragraph 34 should not be made as the wording has not yet been exposed as part of the IAS 24 amendment. Although the Board did not say so explicitly in the meeting, it seemed to accept that this issue would have to be treated as a consequential amendment to the expected IFRS 8 as a result of the forthcoming proposed amendments to IAS 24.

Definition of listed companies

The staff recommended to changing the wording of the scope of IFRS 8. Thus, IFRS 8 shall apply to:

• a. the separate or individual financial statements of entities:
  • whose debt or equity instruments are traded in a public market (a domestic or foreign stock exchange or an over-the-counter market, including local and regional markets) or
  • that file, or are in the process of filing, their financial statements with a securities commission or other regulatory organisation for the purpose of issuing any class of instruments in a public market and
• b. the consolidated financial statements of groups with a parent:
  • whose debt or equity instruments are traded in a public market (a domestic or foreign stock exchange or an over-the-counter market, including local and regional markets) or
  • that files, or is in the process of filing, the consolidated financial statements with a securities commission or other regulatory organisation for the purpose of issuing any class of instruments in a public market.

The Board agreed to the staff's recommendation.