IFRS 8 amendments

Date recorded:

IFRS 8 Operating Segments [Agenda paper 27]


The Board has been discussing potential improvements to IFRS 8 Operating Segments. The work is a consequence of the post-implementation review of IFRS 8 which the IASB started in January 2012. The IASB completed the review when it published a Feedback Statement in July 2013. The Board began considering specific possible changes to IFRS 8 in May 2015, continuing its discussions in two meetings in 2014 and one in 2016. In May 2017 the Board published an Exposure Draft with proposed amendments. The Board discussed the comments it received in relation to those proposals in November 2017.

At this meeting the Board will discuss the direction of the project, which began in 2012. In the light of the length of the project and the reaction of the Board in 2017 the staff considered whether the Board should bring the project to conclusion without moving forward on any of the proposed amendments, proceed with all of the proposals or, as the staff recommend, proceed with a (modified) sub-set of the proposals.


The staff asked the Board to consider each individual amendment before coming back to consider the general direction of the project.

The Board then did so, the Board approved all of the individual staff recommendations. The result was support for four narrow amendments. The Board was then asked if they wanted to go ahead with the four amendments, do nothing or wait to see how the FASB work develops. The staff were recommending that the Board plan to finalise the amendment but wait until the FASB work has progressed to the point that the IASB can decide to consider similar changes (which relate to eliminating the concept of “similar economic characteristics”). This discussion therefore took place after papers 27A-D had been discussed.

The first member to speak was supported the recommendation to proceed, but reluctantly. The project needed to be wrapped up. Others thought there was not enough to justify making changes and they should simply stop. If the FASB develops promising work then the IASB can pick this up later. A member noted that if the IASB picks up the FASB work it should expose at the same time as the FASB rather than wait for the FASB feedback.

Many were concerned about the timing and the consequences of waiting for the FASB’s work to be completed. It could take 3 to 5 years because a change such as eliminating the concept of “similar economic characteristics”.

In response to a question, the staff assessment is that if the Board finalised the four changes the IASB and FASB requirements would still be converged.

The Vice-Chair said it was important for the IASB to determine its own destiny. She said one option was to do the work on how the annual report concept works. That will take some months, and the Board might be in a better position to assess the FASB’s work. If that work looks to be progressing and is something the IASB should consider more carefully the Board could adapt and consider incorporating possible aggregation changes. 

The discussion came down to assessing whether the four small changes are important. If they are and can be justified on their own the Board should go ahead. They should monitor the FASB work in any case. Some Board members said that the four amendments are not sufficient to justify finalising them. One said the amendments to IFRS 8 are nice to have but not essential and that the IAS 34 changes are the most substantial.  

Board decision

The Board decided that the package of amendments would not bring sufficient improvements to justify proceeding with them (8 Board members, with one member absent).

Board members were concerned about how this decision would be communicated. It will need to be emphasised that many of the concerns that were identified when the PIR was undertaken in 2012 have been worked through by preparers. By deciding not to proceed with these minor amendments the Board is responding to these changed circumstances. The Board also noted that the work from the PIR and exposure draft would not be lost. If the FASB’s work leads the IASB to consider making changes to IFRS 8 in relation to aggregation, these amendments could be considered at that time. It is just that the Board could not justify making the amendments on their own.

Proposed amendments to the definition of the chief operating decision maker (CODM) [Agenda paper 27A]

Staff analysis

The PIR found that there are practical difficulties in identifying the CODM, such as whether the role of the CODM is principally strategic or operational and where the role of the CODM should sit in an entity’s management hierarchy.

The proposed amendments aimed to address those concerns by improving the definition of the CODM, adding emphasis to the nature of the function represented by the CODM and the types of decisions the CODM makes about the operating segments of the entity. The proposal also included a requirement to disclose the title and description of the role of the individual or group identified as the CODM.

The comment letters to the Exposure Draft indicated that the proposed amendments to clarify the role of the CODM did not provide the clarity the Board had intended. In particular, the proposal to refer to decisions about allocating resources attracted questions as to comments that whether resource allocation is an operating or a strategic decision and, if the latter, how this fits with the operating role of the CODM. Some respondents thought the proposed amendments were not helpful and could result in the CODM being identified at a higher level than currently identified in accordance with IFRS 8.

The proposal to disclose the title of the CODM attracted fewer comments. Those who did comment were generally supportive although some respondents thought that it is unlikely to provide users with useful information for decision-making and could add clutter to the financial statements.

Additional outreach

The staff asked ASAF for its advice at its December 2017 meeting. Many ASAF members did not support the clarifications proposed in the Exposure Draft. These members were of the view that the cost of proceeding with the proposed amendments outweighed the potential benefits. While there might have been some initial difficulties in the identification of the CODM, these initial difficulties had now largely been resolved. ASAF members were concerned about the cost of reopening the debate on the identification of the CODM to apply the proposed amendments.

Additional outreach with regulators indicated that they had continuing concerns about whether or not the CODM has been identified at the appropriate level and potential difficulties in overturning the determination of a CODM made by an entity. Some regulators think including non-executive directors in the definition of the CODM could lead to the CODM being recognised at a higher level and therefore reduce the number of segments reported.

The staff also state that different legal and governance structures influence the identification of the CODM and that regulators place emphasis on different parts of the CODM definition. Although the staff do not have any evidence to suggest that this results in a different CODM being identified they believe regulators are taking different approaches to the enforcement of IFRS 8.

The staff conclude that the responses to the Exposure Draft, combined with additional feedback obtained from our outreach activities, indicate that the proposed amendments have not met the objectives of the Exposure Draft and therefore do not respond to the findings of the PIR. Additionally, the responses to the proposals and the further outreach undertaken suggest that, subsequent to the PIR, solutions have been found to some of the practical issues associated with identification of the CODM highlighted in the PIR. Stakeholders do not want to reopen the debate on the identification of the CODM unless there are very clear benefits that will outweigh the costs.

The staff are therefore recommending that the Board does not proceed with the proposed amendments to the definition of the CODM or take any further steps in relation to the definition.

The proposals to disclose the CODM aimed to make the entity’s decision-making process more transparent to users of financial statements. Most respondents are supportive, with no strong objections, of this additional disclosure. Accordingly, the staff recommend that the Board proceed with this proposed disclosure.

Staff recommendations

The staff are recommending that the Board:

  • a) not proceed with the proposed amendments to help identify the CODM;
  • b) proceed with the proposed amendment requiring disclosure of the CODM; and
  • c) take no further action at this time in relation to identifying the CODM.


Initial reaction of Board members is that a lot of time has passed and the problem is not as great now as it might have been when the PIR was undertaken. Members assumed that the disclosure requirement was low cost but some members questioned the information content in such a disclosure. Others supported the disclosure recommendation because it might make people think harder about establishing the decision-maker because it becomes more public.

One member was less comfortable with the third part of the recommendation. The member wondered if there would be value in assessing whether practice is what we expected.

Board decision

The recommendation was supported by 13 Board members. One member was absent.

Proposed amendment to link reportable segments with other parts of the annual reporting package [Agenda paper 27B]

Staff analysis

The proposal would have required an entity to explain in the notes to the financial statements when segments identified by an entity differ between the financial statements and other parts of its annual reporting package. The proposal attracted a lot of comments. Although nearly all respondents agree that there should be consistency in how an entity describes segments and reports related information in its different reports, and that there are problems with consistency in practice. But there were consistent concerns about the Board’s mandate to link IFRS 8 segments with other parts of the annual reporting package the definition of ‘the annual reporting package’.

Preparers, national standard-setters, accounting firms and accounting associations did not support the proposal because explanations of differences in information contained in financial statements and other parts of its annual reporting package belong outside of financial statements and that it is the role of securities regulators to ensure that the information is consistent. They were also concerned that the proposal will create a precedent beyond segment reporting for reconciling information between financial statements and other parts of the annual reporting package.

Regulators and investors were the strongest supporters of the proposals. Although there was overall support for the proposal from investors, some investors expressed a concern that the proposal might create a disincentive for preparers to provide useful voluntary disclosures through their annual reporting packages.

Regulators, preparers, national standard-setters, accounting firms and accounting associations said more guidance would be required as to what constitutes ‘the annual reporting package’, including the meaning of ‘published at approximately the same time’.

All groups of respondents questioned whether the requirement was auditable. Staff outreach with the IAASB suggested that the disclosures could be audited if the annual reporting package is available to the auditor in sufficient time before the audit opinion is issued.  

The staff think that respondents have raised valid concerns and are persuaded by respondents, including auditors, who said that most of their concerns would fall away if the Board restricted the proposal to link segments in financial statements only to the annual report rather than the broader annual reporting package. Some will remain even with limiting the scope of the proposal to the annual report; the Board will still need to address what constitutes a ‘segment’ in other parts of the annual report and whether, for example, differences that arise from different levels of aggregations would need to be included in the entity’s explanation.  

If the Board decides to proceed with the recommendation to limit the scope of the proposal, the staff recommend the Board ensure that the definition of the ‘annual report’ is aligned across all relevant IFRS Standards and if possible with International Standards on Auditing.

Staff recommendations

The staff are recommending that the Board require an entity to explain in the notes to the financial statements when segments identified by an entity differ between the financial statements and other parts of its annual report.  


Several members agreed with narrowing this requirement to an annual report. However, several said that the problem is not between the management commentary and the financial statements and would not support the staff recommendation (i.e. they would not proceed with even the narrower proposal). They thought the disclosure would be unlikely to be effective. The staff said they wanted to get a sense of whether the narrower requirement was supported and they could bring a paper back to see if it could be operationalised.

One member thought the Management Commentary Practice Statement might be a better place to deal with this. The staff reminded the member that it is not a Standard.

One member did not support the proposal, but because he thought it did not go far enough.

Board decision

The recommendation was supported by 9 Board members. One member was absent.

Proposed amendment to the aggregation criteria for segments [Agenda paper 27C]

Staff analysis

The PIR found that many investors think there is too much aggregation of operating segments. Auditors and preparers said there are practical difficulties in determining when operating segments can be aggregated.

In response, the Board proposed adding to IFRS 8 two examples of similar economic characteristics (long-term revenue growth and long-term return on assets). Although there were no strong objections to the proposed amendments, many respondents thought that the amendments did not provide additional clarity and would not improve the application of the IFRS 8 requirements. In particular respondents were still seeking clarity on the assessment of similar economic characteristics.  

The IASB’s and FASB’s requirements on segment reporting are converged. The FASB has a project on segment reporting and is considering the aggregation criteria for operating segments. The FASB plans to undertake extended preparer outreach later in 2018.

The staff assessment is that the proposed amendments leave too many practical challenges and would not address the concerns for which they were designed. Given that the IASB’s and FASB’s requirements are aligned the staff have concluded that it would be more effective to monitor the work of the FASB and decide on an appropriate direction for this proposed amendment on the basis of the information provided by the FASB project.

Staff recommendations

The staff are recommending that the Board:

  • a) not proceed, at this time, with the proposed amendment to clarify the meaning of similar economic characteristics; but
  • b) that the Board monitor the FASB’s project on the aggregation criteria.


The Vice-Chair asked for clarification of the objectives of the FASB project. The staff said the objectives are similar but they are considering a wider range of approaches. This includes brighter lines such as requiring the disclosure of operating segments subject to a practical limit (of 10). One possibility is to combine the quantitative criteria in IFRS 8 with qualitative criteria. One of the proposals is to remove all of the guidance and simply have an upper limit. Board members also asked about timing and how long the Board should wait, and that there needs to be a practical time limit.

Board decision

The recommendation was supported by 10 Board members. One member was absent.

Proposed amendments for additional disclosures, reconciling items and interim financial statements [Agenda paper 27D]

Staff analysis

The PIR found that most preparers thought that the reconciliation requirements were clear and easy to comply with but that many investors found the reconciliations difficult to understand and did not provide enough information to understand what the reconciling items represent. Some investors said that the disclosures required by IFRS 8 did not always provide them with the information that they needed and would like IFRS 8 to require that all entities disclose some specified line items.

In follow-up work some users said that they were not fully satisfied with the nature and timing of the interim disclosures being provided on segments. The provision of earlier restated interim segment information would allow users of financial statements to update any models based on interim reporting intervals when the change in segments is first reported.  

The proposed amendments for additional segment information aimed to clarify that an entity may disclose segment information in addition to that reviewed by, or regularly provided to, the CODM if that helps the entity meet the core principle in paragraphs 1 and 20 of the Standard. There were mixed views on this proposal; some respondents indicated that the disclosure was not specific enough and any additional information that helps the entity meet the core principle in IFRS 8 should be disclosed and not left to the discretion of the entity to decide. Regulators had mixed views on the proposal noting that it was unclear how an entity should determine when or what additional information should be disclosed.

The staff assessment is that the proposed amendments are not necessary. They note that IAS 1.17 already requires an entity to provide additional disclosures when compliance with the specific IFRS requirements is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity’s financial position and financial performance. Because there is an existing mechanism that captures the proposed requirement the staff are recommending that the Board not finalise the proposal.

The proposed amendments regarding the reconciliation suggested a more detailed explanation of material reconciling items, to help users better understand differences between the totals reported for the reportable segments and the entity as a whole. This proposal attracted broad support. The staff are recommending that the Board finalise this part of the proposal.

The proposed amendments to IAS 34 suggested an entity present restated segment information for all interim periods in the first interim report after a change in the composition of an entity’s reportable segments. The proposal does allow an entity some relief, if the information is not available and the cost to develop it would be excessive. Most, but not all, respondents supported this proposal and the staff are recommending that the Board finalise this part of the proposal.

Staff recommendations

The staff are recommending that the Board:

  • a) not proceed with the proposal to clarify that additional disclosures may be provided if they help an entity meet the core principle in paragraphs 1 and 20 of IFRS 8;
  • b)proceed with the proposal to amend IFRS 8 to clarify the level of detail that is required to explain reconciling items; and
  • c) proceed with the proposal to amend IAS 34 to require that all interim periods of the prior financial years be restated and presented in the first interim financial report after a change in the composition of reportable segments.


The Vice-Chair said that when this was proposed it was because the “provided to the CDOM” requirement was the barrier to entities providing this information. One mentioned that the Basis should state that entities were not precluded from providing additional information.

Board decisions

The Board approved all of the recommendations, (a) was supported by 10 Board members, (b) by 12 and (c) by 13. One member was absent.

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