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International Financial Reporting Standard (IFRS) 8
Operating Segments

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International Financial Reporting Standard (IFRS) 8

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?
      --> a component of an entity with the following characteristics:

      (1) discrete financial information is available
      (2) engages in business activities (earns revenue, incurs expenses)
      (3) operating results are regularly reviewed
            --> to assess performance
            --> to make resource allocation decisions (to the segment)

Quantitative thresholds (10% Rule):

      (1) assets are 10% or more of the combined assets
      (2) revenue is 10% or more of the combined revenue
      (3) profit or loss (in absolute amount) is 10% or more of
           the greater of (3a) and (3b), in absolute amount:
            (3a) combined profit of all operating segments
                    --> that did not report a loss
            (3b) 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

Information to be disclosed:

      (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 information:

      revenues from external customers in
      (1a) the entity's country of domicile
      (1b) all foreign countries in total

      non-current assets located in
      (1a) the entity's country of domicile
      (1b) 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
      (3a) product and service
      (3b) group of similar products and services