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FRS 8: OPERATING SEGMENTS. IFRS 8 / FRS 8. EFFECTIVE beging on or after 1/7/2009. SUPERSEDE FRS 114 ( 2004) Segment Reporting Set out requirements for disclosure of info about Entity’s (i) Operating segments (ii) Products & services (iii) Geographical areas it operates

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ifrs 8 frs 8
IFRS 8 / FRS 8
  • EFFECTIVE beging on or after 1/7/2009.
  • SUPERSEDEFRS 114 (2004) Segment Reporting
  • Set out requirements for disclosure of info about Entity’s

(i) Operating segments

(ii) Products & services

(iii) Geographical areas it operates

(iv) Major customers

fasb us iasb

IFRS 8 –

Outcome of their joint short-term project for converging actg

stds , reducing differences, via considerg each stds to adopt

high quality finl reportg solutions: Achieves convergence

with SFAS 131 requirements

Specifically , IASB’s considern of FASB Stat. No. 131(1997):

Segments of an Enterprise and Related Info andIAS 14(1997):

Segment Reporting

ifrs 8 financial reportg req
IFRS 8: Financial Reportg Req.
  • For entity to report finl and descriptive info abt its reportable segment
  • Reportable segments: Operating segments or aggregations of operating segments that meet specified criteria.
  • Operating segments: Components of entity which Chief Operatg dec. maker regularly evaluated their separate finl info to make dec abt resources allocation and in perform. assessment.
  • Financial Info: Required to be reported on the same basis as is used internally for evaluating operatg segment perform. and in deciding resource allocatn
continue reporting of operating seg
Continue….Reporting of Operating Seg

Entity required to report

(1)Measure of operating segment

(i) P&L

(ii) Assets

(iii) Liabilities

(iv) Particular Income & Expenses items (if these info regularly provided to Chief Operatg dec mkr)

(2) Reconciliatnof total reportable segment

(i) Revenues,

(ii) P&L

(iii) Assets & Liabilities

(iv) Other items disclosed for reportable seg that corresponding amt in finl stat

continue reporting products and services and geographical segments
Continue…Reporting Products and Services and Geographical Segments
  • To report

(i) Revenues from its Products or Services (or groups of similar products & services)

(ii) Abt countries it earns rev and hold assets

(iii) Major customers

{Regardless whether info used by mgt in mkg operatg decs)

FRS 8 x requires to report info x prepared for internal use if

necessary info x available and cost to develop excessive

continue report determination of operatg seg
Continue…Report Determination of Operatg Seg
  • Entity to provide descriptive info abt det of:

(i) Operatg seg,

(ii) Products & services of seg

(iii) Differences bet measure. used in reportg seg & finl stat

(iv) Changes in measure of segment amt from period to period

changes from frs 114 2004 identification of segments


  • FRS 114 (2004) required identification of 2 sets of segments based on related:

(i) Products & Services

(ii) Geographical Areas

  • FRS 8 – Reported seg info to be based on info of the components used by mgt to make dec on operatg matters – Identify opertg seg on basis of internal report regularly reviewed by Chief Opertg dec mkr for resource allocatn and perform assessmt.


  • FRS 114 (2004) ~ Reportable seg ltd to those which earn rev from sales to xtrnal customers , x requires vertically integrated operatns as separate seg.
  • FRS 8 ~ An operatg seg of an entity that sells primarily or xclusively to other operatg seg of similar entity is an opertg seg if the entity is managed this way
continue measurement of segments


  • FRS 114 (2004) ~ To be prepared in conformity with actg policies adopted for preparg and presentg finl info for CFS
  • FRS 8 ~ Amt reported for each opertg seg item to be the measure reported to the Chief Opertg dec for resources allocatn and perform assessment purposes
  • FRS 114 (2004) defined seg rev, expense, result, assets and liabilities
  • FRS 8 ~ x define these terms BUT requires explanation how seg P&L, Assets, Liab are measured for each seg
continue disclosure
  • FRS 114 (2004) ~ To disclose specified items about its primary seg (Dominant source & nature of entity’s risks and returns govern the det of PRIMARY SEGMENT reportg format whether bus seg or geographical areas ) ; IAS 14 Para 27…. Primary seg is bus seg (secondary geographical) if risks and rates of return affected by both differences in products & services and geographical areas ~ “matrix approach” evidenced wrt mgt of entity and internal reportg to BOD and COO ; Otherwise to det risks & returns related more to which one
  • FRS 8 ~ To disclose

(a) Factors used to identify opertg seg, includg basis of orgn (whether mgt organises entity wrt differences in products & services, geographical areas, regulatory envi., combinatn of factors or aggregatn of seg)

(b) Types of products and services from which each reportable seg derives its rev

  • FRS 114 (2004) ~ X require disclosure of interest income and expense
  • FRS 8 ~ Report

(i) Specified info abt each reportable seg, if specified amt reviewed or regularly provided to COO in the measure of seg P&L.

(ii) Separate interest rev and interest expense for each reportable seg unless majority of seg rev from interest and COO relies primarily on net interest rev for resource alloctn and perform. assessmt.

  • FRS 114 (2004) ~ Required the disclosure of 2ndary info for either industry or geographical segments to supplement info given for primary seg.
  • FRS 8 ~ Including entity with 1 reportable seg , to DISCLOSE as a whole info abt entity’s products & services, geographical areas and major customers , regardless whether these info x part of seg disclosure
core principle para 1

To enable users of f/s to evaluate

nature and finl effects of entity’s bus ]

activities and economic


scope para 2 4
SCOPE ….PARA 2 - 4

Para 2 ~ FRS 8 shall apply to:

(a) Separate or Indv. Finl stat of an entity whose

  • Debt & Eq instru traded in public mkt (include domestic, foreign and local and regional over the counter mkt)
  • Files, in process of filling its f/s to SC or other regulatory org for purpose of issuing instruments to mkt

(b) the CFS of grp with a parent:

  • as in (a)

Para 3 ~ Entity x required to comply to FRS chooses to

disclose info abt its segment(s) x comply to FRS 8 x describe

info as seg info

Para 4 ~ F/S with CFS and separate f/s of parent, seg info

only required in CFS

operatg segments
Operatg segments
  • Para 5 ~ An operatg seg is a component of an entity :

(i) Engages in bus actv which it may earn rev and incur expenses e.g. start- up operatn (is an opertg seg where rev yet to be earned). Also include rev & exp. from transactn with other component of same entity,

(ii) Operatg results regularly reviewd by CO dec mkr for resource alloctn & perform assess and

(iii)Discrete info available (sep finl stat of component is produced)


Para 6 ~ Not every part of an entity necessarily an operatg seg . Eg ~ Corporate HQ or some functional dept x earn revenue and if earn only incidental to the activities of entity, HENCE X opertg seg INCLUDING POST NYMENT BENEFITS PLANS

  • Para 7 ~ Chief Operatg dec mkr identifies a functn to allocate resources and assess perform of operatg seg of entity… x necessarily mgr with specific title. OFTEN, CEO, COO and include GROUP OF EXECUTIVE DIRECTORS or OTHERS.
  • Para 8 ~ Many identify operatg seg based on Para 5 ….but some produce reports of bus activities presented in variety of ways…If CO uses > 1 seg info, other factors may identify a single set of components as constituting opertg segs includg:

(a) Nature of bus activities of each component, (b) Existence of mgrs responsible for them and (c) Info presented to BOD


Para 9 ~ Term Segment mgr …identifies functn x specific tirtle…Directly attrb & maintains regulr contact with CO dec mkr to discuss operatg activities, finl results, forecasts or plans for seg, CO dec mkr can be seg mgr for some opertg seg…..1 mgr can be seg mgr for > 1 opertg segment…Set of entity’s component mgd by 1 seg mgr, constitutes opertg segment

para 10
Para 10….
  • Matrix form of org….Eg Some mgrs responsible for diff product & service lines worldwide, others specific geographical areas. CO dec mkr regularly reviews both…In this situation entity to determine set of components constitutes opertg segs in reference to core principle.
reportable seg
Reportable seg

Entity to report separately info abt each opertg

seg :

  • As identified in accordance to Para 5-10 or aggregatn of 2 or > based on Para 12, and
  • Exceed quantitative threshold of Para 13

Para 14-19 specify situatns for which separate

info abt opertg seg to be reported

para 12 aggregatn criteria
Para 12…Aggregatn Criteria
  • Opertg segments with similar economic characteristics likely’ve similar long-term finl perform. Eg. Similar Ave. Gross Margins.

similar eco. character. and the segments are similar wrt:

(a) nature of products & services;

(b) nature of prodn process;

(c) type or class of customer for product & services;

(d) methods used to distribute products or provide services; and

(e) regulatory environment, eg bankg, insurance, public utilities

para 13 quantitative thresholds
Para 13…Quantitative thresholds

Entity to report separately info abt opertg seg. if meet

following quantitative thresholds:

  • Its reported rev, including sales to external customers & interseg sales or transfers, is 10% or > of combined rev, internal and external, of all opertg seg
  • Absolute amt of reported P&L is 10% or > of the greater, in absolute amt of

(i) Combined P&L of ALL opertg seg that x report loss, and

(ii) Combined reported loss of all operatg segments that reported loss

(c) Its assets are 10% or > of the combined assets of all operatg segments

other situantns which require separate info abt opertg seg
Other situantns which require separate info abt opertg seg
  • Para 14 ~ Reportable seg to constitutes combinatn of operatg segments x meet quantitative thresholds info provided they share similar econ character and majority of apects of Para 12
  • Para 15 ~ If total external rev reported by opertg segs < 75% of entity’s rev, addtl operatg segments to be identified as reportable seg (even if x meet criteria Para 13) until at least 75% entity’s rev included in reportable seg
  • Para 16 ~ Info of other bus activ and opertg segments x reportable seg to be combined and disclosed in ‘all other segments’ category separately from reconciling items required by Para 28.
  • Para 17 ~ If Mgt judged reportable seg in the immediately preceding period is of continuing significance, in current period shall continue report it info separately even x meet Para 13 (quantitative thresholds)
  • Para 18 ~ Operating segment becomes reportable segment in current period….For comparative purposes, need to restate segment data of prior period to reflect newly reportable segment as separate seg, even if previously x meet Para 13 requirement
  • Para 19 ~ If the number of reportable segments have reached 10 (in consideration of Para 13-18), entity shall consider whether a practical limit has been reached, Athough Std has made x specific limit of it…as seg info may become too detailed.
disclosure para 20 24
Disclosure… Para 20 -24
  • General Info (as discussed earlier)
  • Info abt P&L, Assets Liab (as discussed earlier) and if the following included (or not) in measure of seg P&L reviewed by ( otherwise regularly provided to) CO Rev from external users
  • Rev from transactn with other opertg segments
  • Interest rev
  • Interest expense
  • Depn and amortisatn
  • Material items of Income and Expense Para 86 FRS 101
  • Entity’s interest in P&L of associates and JV wrt equity method
  • Income Tax Expense or Income
  • Material Non-Cash items other than depreciation and amortisatn
measurement para 25 27
Measurement Para 25 -27
  • Amt shall be the measure reported to CO dec mkr for purposes of allocatg resources or perform assessment
  • Adj and eliminatn made in preparg entity’s f/s and allocatn of rev, expenses, gains or lossess included in determg seg P&L if included in measure of seg P&L used by CO
  • Assets and Liab included in the measures of seg assets and liabilities if used by CO dec mkr
  • Amt of rev, expenses, assets and liab to be allocated on reasonable basis for reported seg
  • Measure of seg P&L, assets and liabilities shall based on method used by CO dec ..IF CO used > than 1 measure, used measurement principles most consistent with those used in measuring corresponding amt in entity’s f/s
  • To provide explanation of measurement used for seg P&L, assets and liabilities. Min to disclose:

(a) Basis of actg

(b) Nature of differences of segments P&L and entity’s PBT or Income and discontinued operations (If x apparent from Para 28 reconciliation disclosure). Eg Differences in actg policies and policies for allocation of centrally incurred costs necessary to understand reported seg info

(c) Nature of differences in measurement of entity’s assets, liabilities and segments assets and liabilities

(d) Nature of any changes from prior periods in the measurement methods of segment P&L and the effect on segment P&L

(e) Nature and effect of asymmetrical allocations to reportable segments

continue para 28 reconciliations
Continue…Para 28 Reconciliations

Entity to provide reconciliation of :

  • Total reportable segments’ revenues to the entity’s revenue
  • Total reportable segments’ measures of P&L to entity’s PBT (tax income) and discontinued operations. Tax expense allocated to report. seg, reconcile with entity’s PAT
  • Total of reportable segments’ assets and liabilities to entity’s assets and liabilities respectively
  • Total of the reportable segments amts for every other material item of info disclosed compare with entity’s corresponding amt

All material reconciling items shall be separately identified and

described. Eg. Amt of each material adj. needed to reconcile

report. seg P&L to entity’s P&L arising from diff actg policies


restatement of reported info para 29 30
Restatement of reported info(Para 29-30)
  • If entity changes structure of its internal orgn causes compositn of report seg to change, to restate info for earlier period include interim period
  • If x restatement made to reflect change , disclose in yr change occur, segment info of current period that contain both old basis and new basis of segmentation
entity wide disclosures para 31 34
Entity-wide disclosuresPara 31 -34
  • Entity bus actv x organised on basis of differences in related products & services or geographical areas…may report revenues from broad range of essentially different products or services or similar…or report revenues from customers in different geographical areas or similar
info abt products and services
Info abt products and services
  • Report rev from external customers for each product and service or similar grp of them unless x info available or such info costly
info abt geographical areas
Info abt geographical areas
  • To report on geographical info the followings (unless x available or costly) :
  • Rev from external customers based on their respective geographical locatn (if material disclosed separately) & basis for attributing such rev
  • Non- current assets other than finl instru, deferred tax assets , post-Nyment benefits assets and rights arising under insurance contracts on based on their respective geographical locatn (if material disclosed separately)

Amt reported to based on finl info used to produce entity’s


info about major customers
Info about major customers
  • Entity to provide extent of its reliance on its major customers
  • If rev from transactns with 1 external customer amt 10% or > of entity’s rev, TO DISCLOSE THE FACT,

(i) Total amt of rev from each such customer

(ii) Identity of the segment or segments reportg the revenues

  • Entity X disclose identity of a major customer or amt of revenues each segment reports from that customer
  • Single customer ~ a grp of entities known to a reporting entity under common ctrl AND govt and entities known to the reportg entity to be under the ctrl of that govt
take home notes
Take home notes
  • Operatg segments ~ Reportable Segment (Para Para 11-19 )
  • Reportable segment ~ to report separate info
  • CO dec mkr by function allocates resources and make assess of seg perform
  • Seg mgr to identify operatg seg
  • Disclosure
  • Measurement