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IFRS 8 – Aggregation of operating segments and identification of the chief operating decision maker (new)

Date recorded:

The IASB asked the Committee to review a submission received requesting minor improvements to IFRS 8 Operating Segments, regarding application of the aggregation criteria and the identification of the chief operating decision maker (CODM). More specifically, the submitter generally sought that disclosure be provided of both the operating segments that have been aggregated and the economic indicators that have been assessed to conclude that operating segments have "similar economic characteristics" in accordance with paragraph 12 of IFRS 8, while also requesting further clarification on the function of the CODM.

Committee members expressed concern for adding disclosure regarding judgements in applying aggregation criteria as they did not identify this area as a significant need to users of the financial statements. One Committee member noted that IFRS 1 First-time Adoption of International Financial Reporting Standards and the Conceptual Framework require disclosure of those matters which would materially affect users of the financial statements, and thus, where considered necessary, relevant disclosure should be provided absent any amendment to IFRS 8 disclosure requirements.

The Committee decided that this was not an issue to be resolved through disclosure, which the Committee intends to communicate as a recommendation to the IASB.

As part of this discussion, the Committee also considered the function of the CODM, and whether operational and strategic roles should or can be segregated in determining the CODM.

Multiple Committee members highlighted that strategic roles are commonly the role of board members (including non-executive directors), but noted that IFRS 8 generally refers to "management" in characterising the CODM; specifically, paragraph 7 of IFRS 8 notes the CODM is "often the chief operating decision maker of an entity or its chief executive officer or chief operating officer but, for example, ... [it] may be a group of executive directors or others."

While certain Committee members had seen boards identified as the CODM, many had not, and thus, the Committee decided to take this issue to the IASB to see if they would like the Committee to evaluate further if the CODM could be a board (inclusive of non-executive directors).

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