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Presented by

CA.BHARAT BHUSHAN
B-Com, ACA
M/S BHARAT ADITYA & ASSOCIATES
#896,Street No:01,Abadi Amar Kot,
Near Sunder Nagar,Amritsar-143004.
(O)0183-5002171 (M) 98880-39070
E-Mail: ca.bharatbhushan@icai.org
IFRS-8
OPERATING SEGMENTS
CORE PRINCIPLE
An entity shall disclose information to enable users
of its financial statements to evaluate the nature
and financial effects of the business activities in
which it engages and the economic environments
in which it operates.
APPLICABILITY
It shall apply to the
Separate or Individual Financial Statements of an entity ;
(a) Whose debt or equity instruments are traded in Public
Market (either domestic or foreign stock exchange)
(b) that files OR
is in the process of filing its FS ( Financial Statements )
with securities commission or other regulatory organization
for the purpose of issuing any class of instruments in the
public market.
AND
Consolidated Financial Statements of group with parent
(a) Whose debt or equity instruments are traded in Public
Market (either domestic or foreign stock exchange)

(b) that files OR


is in the process of filing its CFS (Consolidated Financial Statements)
with securities commission or other regulatory organization
for the purpose of issuing any class of instruments in the
public market.
Important
*Where financial report contain both CFS of parent
and separate FS of parent, then this IFRS shall apply to
the CFS (Consolidated Financial Statements) only.
(Para – 4 of IFRS 8)

*Where any entity is not covered under this IFRS and


chooses to disclose the information of any segment and
if does not comply with requirements of this IFRS, then
it will not describe the information as Segment Information
(Para – 3 of IFRS 8)
DEFINITION of Operating Segment
Operating segment is Component of an entity;
(a) That engages in business activities from which it may earn
revenues and incur expenses (including revenue and expenses
with other components of entity)
(b) Whose financial results are regularly reviewed by CHIEF
OPERATING DECISION MAKER to make decision about
resources to be allocated to the segment and assess its performance
AND
(c.) About which discrete financial information is available.
CHIEF OPERATING DECISION MAKER
Chief Operating Decision Maker allocate the resources to the
Segments and assess its performance. Often, the CODM is CEO
of the entity but it may also a group of executive directors or others

Generally, an operating segment has a segment manager who is


directly accountable to and maintains regular contact with CODM.
A Single manager may be the segment manager for more than one operating
Segment. If characteristics of Definition of Operating Segment apply to
more than one set of components of an entity but there is only set for
which segment Managers are held responsible, that set of components
constitutes the operating Segment.
MATRIX FORM OF ORGANIZATION

In some entities, some managers are responsible


for different products or service lines whereas
some managers are responsible for different
geographical areas.CODM regularly reviews the
operating results of both set of components. In
that situation, entity shall determine which set of
component constitute the operating segment by
reference to the core principle.
Quantitative Threshold (Para 13 – IFRS 8)
An entity shall report separate information of Operating Segment which meets
ANY of the following threshold ;
(a) Its reported revenue (including sales to external customer and inter segment or
transfer) is 10% of more of combined revenue of all operating segments.
(b) Absolute amount of its reported profit OR loss is 10% or more of the greater
in absolute amount of
(i) Combined reported profit of all operating segments that do not report loss
and
(ii) Combined reported loss of all operating segments that reported loss.
(c). Its assets are 10% or more of combined assets of all the operating segments
*If any segment do not meet the above criteria, still be a reportable segment, if the
Management believe that information about the segment would be useful to the
Users of Financial Statements.
AGGREGATION CRITERIA [Para-12 IFRS-8]
Two or more segments may be aggregated if the aggregation is consistent
with the core principle of this IFRS, segment have similar economic
characteristics, and segments are similar in EACH of the following
respects;
 Nature of products & Services

 Nature of Production Process

 Type or class of customers for their products or services

 Methods used to distribute their products or to provide their services

 If applicable, nature of regulatory environment e.g. banking, insurance,


Public utilities .
*An entity may aggregate two operating segments which do not meet the
Quantitative threshold criteria to produce an operating segment if both
segments have similar characteristics and share the majority of
aggregation criteria listed in para -12 [para-14 IFRS-8]
Identification of Additional Operating
Segments [Para-15 IFRS-8]
If total external revenue reported by all operating
segments constitutes less than 75% of total entity’s
revenue, an entity shall identify additional operating
segments untill at least 75% of entity’s revenue is
included in reporting segments
Information of immediately proceeding
reporting segment [Para-17 IFRS-8]

If management judges that operating segments identified


as reportable segment in the immediately proceeding
period is of continuance importance, the information
regarding that segment shall continue to be reported
separately in current period, even if it does not meet
the Quantitative Threshold given in Para-13 IFRS-8
Comparative Information of Current
Reportable Segments [Para–18 IFRS-8]

If an operating segment is identified as reportable in


the current period in accordance with Quantitative
Threshold given in Para-13, segment data of prior
period shall also be stated for comparative purpose
even if in prior period it does not meet the criteria of
Quantitative Threshold.
DISCLOSURE
To give effect to the core principle of this IFRS, an
entity shall disclose the following for each period for
which statement of comprehensive income i.e. ANNUAL
FINANCIAL STATEMENTS are prepared.

( A ) GENERAL INFORMATION

( B ) INFORMATION ABOUT PROFIT OR LOSS, ASSETS


AND LIABILITIES

( C ) RECONCILIATION
( A ) GENERAL INFORMATION
(i) Factors used to identify reportable segments
(ii) Type of products and services from which each
reportable segment derives its revenue.
(B) INFORMATION ABOUT PROFIT OR
LOSS, ASSETS AND LIABLITIES
(i) An entity shall report Profit or Loss and Total
Assets of each reportable segment.
(ii) An entity shall report a measure of Liabilities of
each reportable segment if such information is
regularly Provided to CODM
(iii) An entity shall report the following if it is
included in the measure of profit or loss regularly
reviewed by CODM or is otherwise regularly
provided to CODM.
Contd………
 Revenue from external customers
 Revenue from transactions with other operating segments
of same entity
 Interest revenue
 Interest expense
 Depreciation and amortization
 Material items of income and expense disclosed in accordance
Para-97 of IAS-1.
 An entity’s interest in Profit or Loss of associates or Joint
Venture accounted with Equity Method.
Contd……………..
 Income tax expense or income.
 Material non-cash expenses other than depreciation
and amortization
(C) RECONCILIATION
(i) Total of reportable segment’s revenue to the entity’s
revenue.
(ii) Total of reportable segment’s measure of Profit or Loss to
the entity’s measure of Profit or Loss before tax expense
and discontinued operations. If an entity allocates tax
expense to reportable segments then it may reconcile it
after tax expense.
(iii) Total of reportable segment’s assets to entity’s assets.
(iv) Total of reportable segment’s liabilities to entity’s liabilities if
segment’s liabilities are reported in accordance with
Contd………..
with Para-23 of this IFRS.
(v) Total of reportable segment’s amounts for every other
material items of information disclosed, to the corresponding
amount for the entity.
THANK YOU

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