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Operating segments (Disclosures (The standard also requires further…
Operating segments
Disclosures
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Information on operating segment assets and liabilities and profits and losses only need to be disclosed if reported to the chief decision maker of the entity and the information disclosed may be measured in a different way to the primary or main statements
The standard does list out what would normally be expected to be shown in relation to revenues, profits and losses if these are reported to the chief decision maker, including revenue (broken down between revenue to external customers and other operating segments), interest revenue and expense, depreciation and amortisation and other major non cash items, material items disclose separately as required by IAS 1 and income taxes
The entity must also provide reconciliations for the amounts disclosed by operating segment to the total amounts for the entity as shown in its main statements. Such reconciliations will highlight if the operating segment amounts have been measured differently to the primary or main statements of the entity but will also show any results outside the operating segments reported for example head office costs, assets and liabilities
The standard also requires further disclosures broken down as follows unless it would involve undue costs or effort
Information about products or services, revenues from external customers for each product or service lines
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Information about major customers when any individual customer revenue represents 10% or more of total revenue
The definition of an operating segment is key. The standard describes an operating segment as a component of an entity
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Whose operating results are regularly reviewed by the entity's chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance
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Larger companies often have a number of business lines and operations in many different places geographically
It is helpful for users of accounts to see the results broken down into different segments in order to aid analysis because they often have different profit characteristics, asset bases and potential for future growth
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IFRS 8 works on a management model i.e the segments that are reported are those that are reported internally to the decision making management of the entity
Information for each operating segment must be presented separately unless the characteristics of any operating segments are so similar (by reference to the nature of their products, production process, customers etc) that they ought to be aggregated
Any operating segment representing over 10% of gross revenue, profits or assets of the entity must always be presented separately