IFRS 8 Operating Segments Summary

IFRS 8 Operating Segments

• Issued in November 2006: replaced IAS 14
• Recent amendment: by IAS 1 revised in September 2007

What is an operating segment? 

An operating segment is a component of an entity with the following characteristics:

• discrete financial information is available

• engages in business activities (earns revenue, incurs expenses)

• operating results are regularly reviewed to  assess performance and to make resource allocation decisions (to the segment)

 Quantitative thresholds (10% Rule): 

• assets are 10% or more of the combined assets

• revenue is 10% or more of the combined revenue

• profit or loss (in absolute amount) is 10% or more of the greater of (a) and (b), in absolute amount:

     (a) combined profit of all operating segments that did not report a loss

     (b) combined loss of all operating segments that reported a loss

 If an operating segment meets any of the quantitative thresholds, information about the operating segment is reported separately

75% Rule:

If total external revenue (of reported segments) < 75% of entity's revenue additional segments are reported  even if they do not meet 10% Rule until total external revenue (of reported segments) ≥ 75% of entity's revenue

IFRS 8 Operating Segments disclosure information: 

 (1) general information

(2) segment revenues, segment profit or loss, segment assets, segment liabilities, basis of measurement

(3) reconciliations (of the segment totals of following items) to corresponding entity amounts:

• segment revenues, segment profit or loss,

• segment assets, segment liabilities, other material segment items

Entity-wide disclosures:

      (1) geographical areas

      (2) major customers

      (3) products and services

Geographical areas disclosure information

Revenues from external customers in

      (1a) the entity's country of domicile

      (1b) all foreign countries in total non-current assets located in the entity's country of domicile and all foreign countries in total

Major customers information if revenues from a single external customer ≥ 10% of entity's revenue, disclose:

      (2a) total revenues from each of those customers

     (2b) segments reporting revenues from those customers

 Products and services information revenues from external customers for each

• product and service

• group of similar products and services