Concerns about implementation of IFRS 8

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05 Jan 2010

The United Kingdom Financial Reporting Review Panel (FRRP) has issued a Statement FRRP Highlights the Challenge of Implementing New Segmental Reporting Requirements expressing concern about how companies are reporting the performance of key parts of their business in the light of the introduction of IFRS 8 Operating Segments.

IFRS 8 requires companies to provide an analysis of profit, assets, and liabilities so that investors can see the performance of the principal operations or 'segments'. The FRRP reviewed a sample of 2009 interim accounts and 2008 annual accounts and has asked a number of questions about the implementation of IFRS 8, in particular, where:
  • only one operating segment is reported, but the group appears to be diverse with different businesses or with significant operations in different countries;
  • the operating analysis set out in the narrative report differs from the operating segments in the financial statements;
  • the titles and responsibilities of the directors or executive management team imply an organisational structure which is not reflected in the operating segments; or
  • the commentary in the narrative report focuses on non-IFRS measures whereas the segmental disclosures are based on IFRS amounts.
In its statement, the Panel encourages Boards of Directors to test their initial conclusions about their segmental reporting by considering the following questions:
  1. What are the key operating decisions made in running the business?
  2. Who makes these key operating decisions?
  3. Who are the segment managers (as defined in the standard) and who do they report to?
  4. How are the group's activities reported in the information used by management to review performance and make resource allocation decisions between segments?
  5. Is any proposed aggregation of operating segments into one reportable segment supported by the aggregation criteria in the standard, including consistency with the core principle?
  6. Is the information about reportable segments based on IFRS measures or on an alternative basis?
  7. Have the reported segment amounts been reconciled to the IFRS aggregate amounts?
  8. Do the accounts describe the factors used to identify the reportable segments including the basis on which the company is organised?
Click for Statement FRRP Highlights the Challenge of Implementing New Segmental Reporting Requirements (PDF 36k).


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