Home' A Plus Magazine : Oct 2012 Contents William Lim and Candy Fong are HKFRS/IFRS specialist
partners from the national technical department of Deloitte
fail the above quantitative thresholds?
Answer: Paragraph BC30 accompanying
IFRS 8 clarifies that the above aggregation
criteria take precedence over the above
quantitative thresholds. Therefore, if two
or more components of a business meet
the aggregation criteria, they may be
combined as one single operating segment
and hence as one reportable segment,
notwithstanding that they may individually
exceed the quantitative thresholds.
Question 5: Can two operating segments
identified under step 1 that do not meet the
quantitative thresholds be combined and
reported as one reportable segment?
Answer: Yes, provided that the operating
segments have similar economic
characteristics and share a majority of
criterion c of the aggregation criteria set out
Moreover, IFRS 8 requires that if
the total external revenue reported by
operating segments constitutes less than 75
percent of the entity's revenue, additional
operating segments should be identified
as reportable segments even if they do not
meet the 10 percent quantitative threshold.
Key disclosures under IFRS 8
IFRS 8 requires an entity to report a measure
of profit or loss for each reportable segment.
In addition, it requires an entity to report
a measure of total assets and liabilities for
each reportable segment, if such amounts
are regularly provided to the chief operating
Various items are also required to be
disclosed when they are either included
in the measure of segment profit or loss or
otherwise regularly provided to the chief
operating decision-maker. The measures
for segment reporting purposes are the
measures reported to the chief operating
decision-maker for resources allocation
and performance assessment purposes.
Question 6: Entity A is operationally based
in Japan while its shares are listed on the
Hong Kong stock exchange and its financial
statements are prepared in accordance
with IFRSs. For internal reporting purposes,
information provided to the chief operating
decision-maker is based on Japanese GAAP
measures. Is Entity A required to convert
the Japanese GAAP measures to IFRS
measures for segment reporting purposes?
Answer: No. IFRS 8 requires Entity A to
report segment information based on the
measures reported to the chief operating
decision-maker (i.e. the Japanese GAAP).
This is also consistent with the overall
management approach set out in IFRS 8.
However, Entity A is required to disclose
reconciliations from the segment reporting
measures to the IFRS financial statements.
IFRS 8 requires reconciliations to be disclosed
a. The total of the reportable segments'
revenues and the entity's revenue.
b. The total of the reportable segments'
profit or loss and the entity's profit or loss
c. The total of the reportable segments'
assets and the entity's assets.
d. The total of the reportable segments'
liabilities and the entity's liabilities.
Items (c) and (d) are required if such
amounts are regularly provided to the chief
Question 7: Entity A operates two types
of stores -- clothing and home products,
which are considered as two operating
segments in accordance with IFRS 8. The
management discussion and analysis
included in Entity A's annual reports
discusses the performance of these
segments separately. Is it appropriate for
Entity A to aggregate the two operating
segments as one reportable segment?
Answer: No. It would not be appropriate
to do so because it is unlikely that the two
operating segments would meet the above
aggregation criteria as they are not "similar"
on various aspects. Also, the presentation
of one reportable segment would not be
consistent with the overall management
approach required by IFRS 8. Indeed, over
the past few years, various regulators have
expressed concerns about the inconsistency
between the management discussion and
analysis and segment information disclosed
in the financial statements.
Question 8: IFRS 8 requires entity-wide
disclosures, including information about
products and services, geographical areas
and major customers. Entity A has just one
reportable segment. Is Entity A required to
make any entity-wide disclosures?
Answer: Yes, Entity A is required to make
entity-wide disclosures despite the fact that
it has only one reportable segment.
This article details some IFRS 8 application
issues commonly encountered in practice.
As mentioned, IFRS 8 uses a management
approach to identify segments and hence
significant judgment may be needed. If you
have any application issues on IFRS 8 please do
not miss the chance to give comments on the
request for information by 16 November 2012.
44 October 2012
"IFRS 8 uses a management
approach to identify
segments and hence
significant judgment may
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