- 4 Marks
Question
IFRS 8: Operating Segments requires particular classes of entities (essentially those with publicly traded securities) to disclose information about their operating segments. Information is based on internal management reports, both in the identification of operating segments and measurement of disclosed segment information. It applies to the separate or individual financial statements of an entity and to the consolidated financial statements of a group.
Required:
Distinguish between operating segments and reportable segments.
Answer
| Operating Segments | Reportable Segments |
|---|---|
| An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the entity’s chief operating decision maker, and for which discrete financial information is available. | Reportable segments are operating segments or aggregations of operating segments that meet specific quantitative thresholds. These thresholds include: |
| Revenue: Reportable if its reported revenue is 10% or more of the combined revenue, internal and external, of all operating segments. | |
| Profit or Loss: Reportable if its reported profit or loss is 10% or more of the combined profit or loss of all operating segments that report a profit or a loss, whichever is greater. | |
| Assets: Reportable if its assets are 10% or more of the combined assets of all operating segments. |
The key difference between the two is that operating segments represent components of a business, whereas reportable segments meet certain thresholds and must be disclosed in the financial statements.
- Tags: Financial Reporting, IFRS 8, Operating segments, Reportable Segments
- Level: Level 2
- Topic: Financial Reporting Standards and Their Applications
- Series: MAR 2024
- Uploader: Dotse