IFRS 8 amendments

Date recorded:

Improvements to IFRS 8 Operating Segments arising from the post-implementation review – Feedback summary: cover paper – Agenda paper 27

The Board published Exposure Draft Improvements IFRS 8 Operating Segments (Proposed amendments to IFRS 8 and IAS 34) in March 2017. The purpose of this meeting was to present the Board with:

  • a summary of the feedback received (AP 27B); and
  • a proposed list of areas for further analysis (AP 27C).

AP 27A contained a brief history of IFRS 8.

IFRS 8 is substantially converged with its US GAAP equivalent. In September 2017, the FASB decided to add a project to its agenda on segment reporting. The project will focus on improvements to the segment aggregation criteria and reconciliations of segment information to the financial statements.

Next steps

The Staff will analyse the feedback received and provide recommendations at a future meeting.

Feedback summary: Improvements to IFRS 8 (Proposed amendments to IFRS 8 and IAS 34) - Agenda paper 27B

Overview of comments received

Respondents had mixed views on the proposals in the ED. Investors generally thought the proposals were not sufficient and encouraged the Board to make more substantial changes. On the other hand, regulators, preparers, national standard-setters and accounting firms agreed with some but not all of the proposals and sought clarification on certain aspects of the proposals. They also questioned whether the benefits would outweigh the costs of implementing the proposals.

Summary of feedback received

1) Clarifications to help identify the chief operating decision maker (CODM)

Nearly all respondents supported the Board’s intention to help entities identify the CODM; however, they found the proposals confusing and do not achieve the Board’s intention. In particular, the respondents struggled to distinguish between operating and strategic decisions and raised the following questions:

  • a) what constitutes an operating decision? E.g., is a decision about allocation of resources a strategic or an operating decision?
  • b) who is the CODM when the person (or the group of people) who makes operating decisions is different from the one in charge of resource allocation?
  • c) if, and when, can a board of directors be a CODM?

Some respondents were also concerned that the proposed focus on operating decisions would lower the level at which the CODM is identified, resulting in more operating segments.

2) Linking IFRS 8 segments with other parts of the annual reporting package

This proposal attracted a large number of comments. The respondents were generally concerned about:

  • a) the requirement to link IFRS 8 segments with other parts of the annual reporting package; and
  • b) the definition of ‘annual reporting package’.

With regard to (a), investors and regulators were generally supportive of the proposal. However, preparers, national standard setters and accounting firms disagreed with the proposal and questioned whether the Board had a mandate to require such a linkage. These respondents believed that it is the role of the regulator to ensure consistency between the financial statements and the front-end information, and to solicit explanations from the preparer should any difference exist. Furthermore, they were concerned that the proposal would set a precedent beyond segment reporting for reconciling information between financial statements and other parts of the annual reporting package. This could have far-reaching effects and unintended consequences. The lack of clarity on what constitutes the annual reporting package further aggravates this problem.

With regard to (b), almost all respondents asked the Board to clarify what information constitutes the annual reporting package and to provide implementation guidance. They also questioned whether auditors would be in a position to audit information contained outside the financial statements.

3) Clarifications to the criteria for aggregating segments

Whilst most respondents supported the Board’s attempt to provide guidance in this area, they felt that the proposals fall short of their needs. The respondents sought clarification on (1) how to assess and weight similar economic characteristics; and (2) what is meant by ‘long-term financial performance’.

4) Requirement to provide restated interim information for all interim periods (current and prior year) upon a change in segment composition

Respondents generally agreed with this proposal; however, some people were concerned that this may lead to information overload and that preparers may not have sufficient time to prepare all the relevant information for inclusion in the first interim period after a change in segment composition. Furthermore, some respondents disagreed with this proposal on grounds that there is no similar requirement for a change in accounting policy or correction or error, both of which require retrospective application.

5) Other proposals

The respondents generally agreed with the other proposals in the ED.


Several Board members cautioned the Staff against broadening the scope of the project when responding to the comments received. The proposed amendments were made in light of the feedback received on the IFRS 8 PIR which indicated that IFRS 8 was generally working well. If the proposals end up creating more problems, then the Board should consider not finalising them rather than spend too much time trying to justify them. For example, identify the CODM may be a significant judgemental area for some entities. A couple of Board members believed that if an entity still could not identify who the CODM is after so many years, then it is unlikely that any amount of clarification would help those entities. If it is decided to reject some of the proposals, the Staff should then assess the costs and benefits of proceeding with finalising the remaining proposals, especially in light of the potential of having to re-open IFRS 8 in a couple of years’ time as a result of the recent FASB decision to add a project on its IFRS 8 equivalent standard. Most Board members were inclined to wrap up this project as soon as possible in the context of the feedback received on the PIR rather than deferring it to incorporate any potential amendments arising from the FASB’s project.

The Board also suggested that the Staff:

  • look to the control definition in IFRS 10 about relevant activities being those that most significantly affect an entity’s returns in trying to distinguish between operating and strategic decisions;
  • clarify that the reconciliation between segment information inside and outside the financial statements do not necessarily set a precedent for reconciling other non-segment information. This is because segment reporting uses the management approach which leads to a natural expectation that the amounts reported inside and outside the financial statements should be consistent. This is not the same for other IFRS information that is not prepared on a management approach basis.
  • clarify what they mean by the ‘same’ segments being shown inside and outside the financial statements. A couple of Board members noted that it is clearly permissible and recommendable that an entity provide more granular information in the narrative sections of the annual report, and that the Staff should make this point clear so as not to deter management from providing useful information, as long as they reconcile the information back to the financial statements.

Feedback summary: areas envisaged for further analysis - Agenda paper 27C


The Board is yet to decide on the future of the project. In light of the feedback received on the ED (see AP 27B), the Staff highlighted potential areas for research on proposals one to three above, as follows:

1) Clarifications to help identify the CODM

  • a) whether a distinction can be drawn between operating and strategic decisions and whether they can be separately defined;
  • b) how to deal with situations when operating decisions are made at more than one level within an organisation;
  • c) whether the lowest level in an entity that has a responsibility for managing the entire entity can be considered a CODM and how to define this ‘lowest level’; and
  • d) whether a board of directors with a majority of non-executive directors can be a CODM.

2) Linking IFRS 8 segments with other parts of the annual reporting package

  • a) whether the Board wants to proceed with this proposal; and
  • b) if the Board decides to proceed with the proposal, to consider providing implementation guidance on what constitutes the ‘annual reporting package’. This could entail redefining the term to exclude certain items e.g. preliminary announcements, or to replace the term with ‘annual report’ to further limit the population of information with which consistency is sought.

3) Clarifications to the criteria for aggregating segments

  • a) whether the Board wants to proceed with this proposal, or to find alternative solutions to address the challenge in applying the existing aggregation criteria in IFRS 8; and
  • b) if the Board decides to proceed with the proposal, to consider elaborating further on what is meant by ‘similar economic characteristics’. However, the Staff note that the FASB had considered this approach in the past but had decided not to proceed with it. In its upcoming project, the FASB’s preliminary proposal is either to introduce a bright-line threshold for aggregation or to remove the aggregation criteria but to impose an upper limit on the number of reportable segments.


This paper was discussed together with AP 27B.

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