IFRS 8 reporting segments seeks to assist the user of financial statements gain a clearer understanding of the performance of the business by requiring disaggregation of the reported financial information into segments.
Definition of reportable segment.
IFRS 8 requires an entity to report financial and descriptive information about its reportable segments. Reportable segments are operating segments or aggregation of reporting segments that meet specified qualitative and quantitative criteria.
An operating segment is a component of an entity:
- That engage in business activities from which it may earn revenues and incur expenses (including revenue and expenses relating to transactions with other components of the same entity)
- Whose operating results are regularly reviewed by entity’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance and
- For which discrete financial information is available.
An entity shall report separately information about an operating segment that meets any of the following quantitative threshold:
- Its reported revenues, including both sales to external customers and inter segment sales or transfer is 10% or more of the combined revenues, internal and external, of all separating segments.
- The absolute amount of its reported profit or loss is 10% or more of the greater, in absolute amount of
- the combined reported profit of all operating segments that did not report loss and
- the combined reported loss of all operating segments that reported a loss.
- Its assets are 10% or more of the combined assets of all operating segments
- Reporting segments may be combined if they have similar economic characteristics
- At least 75% of entity’s total external revenue must be accounted for by reportable segments. Addition segment must be identified if this is not the case.