Segment Reporting: Ifrs 8

Segment Reporting
IFRS 8
2012 KPMG AS, registered in Norway, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.
What will you learn

By completing this module you
will be able to:
1) Describe the CODM

2) Explain how to identify and aggregate
operating segments
3) Explain how to determine reportable
segments
4) Evaluate the quality of disclosures
CODM = chief operating decision maker

2
Agenda
Scope and overview
The CODM
Operating segments
Reportable segments
Disclosure
The closing
Scope
Mandatory if:
Debt or equity instruments traded in a public market
File or in process of filing instruments in a public market
Applies to:
Consolidated financial statements
Company only financial statements
If both presented, applies to consolidated financial statements
Voluntary application:
Apply standard in its entirety
Overview: A management approach
Step 1
Identify the CODM
Step 2
Identify operating segments
Step 3
Aggregate operating segments
Step 4
Determine reportable segments
Step 5
Disclose segment information
Agenda
Scope and overview
The CODM
Operating segments
Reportable segments
Disclosure
The closing
Step 1: Identify the CODM
Highest level of management

responsible for:
Resource allocation
Performance assessment
One CODM per reporting entity
CODM is a function and not a title
CODM could be a body (e.g. board

of directors) or a person (e.g. CEO)
A question for you: CODM (1)

Lila-Tech Executive Committee comprises CEO, COO and President
Committee assesses performance and makes resource allocation decisions
Each Committee member has a single vote
Can you identify the CODM?
A question for you: CODM (2)

Same as previous slide, except that the President can override a vote of the
Committee
Same as previous slide, except that a Supervisory Board reviews the
operation of the Committee
In each case, can you identify the CODM?
Agenda
Scope and overview
The CODM
Operating segments
Reportable segments
Disclosure
The closing
Step 2: Identify operating segments
no
yes
Are the components results reviewed
regularly by the CODM?
no
yes
Is discrete financial information for
the component available?
yes
no
Not an operating segment
Is the component able to earn revenues?
Operating segment
11
Which of these are valid bases for identifying operating segments?
Products
Legal entity
Services
Individual plants
Customers
Individual properties
Geography
12
Lila-Tech operating segments
13
A question for you: Operating segments

The Lila-Tech CODM is thinking of changing the information that he
receives
He would receive:
o All operations related to the Outer Regions of Planet Lila in aggregate
o Other regions on the basis shown on the previous slide
If this change goes ahead, what will be the operating segments?
14
Matrix organisations
Planet Lila
Neptune
Disclosure of information that
enables users of the financial
statements to evaluate the nature and
Earth
financial effects of the business
activities in which the entity engages
and the economic environment in
Mars
which it operates
Jupiter
New Worlds
15
Operating segments might include
Start-up operations
Certain corporate activity

(e.g. R&D)
Vertically integrated operations
Jointly controlled entities and

associates
16
Step 3: Aggregate operating segments
Consistent with core principle?
no
Similar economic characteristics?
no
yes
Similar in each of the following:
Nature of products
and services
Distribution methods
no
Do not aggregate
yes
Regulatory environment
Nature of production
processes
Types of customers
yes
May be aggregated
17
Similar economic characteristics
Long-term average gross margins
In our view, also consider the

future
Useful to consider:
Sales metrics
Trends in sales growth
Return on assets
Capital investment levels
Operating cash flows
In our view, also consider:

Competitive / operating risks
Currency risks
Economic / political conditions
18
Agenda
Scope and overview

The CODM
Operating segments
Reportable segments
Disclosure
The closing
Step 4: Determine reportable segments
Revenue
10% of combined revenue for all segments

(internal and external)
or
Profit or loss
10% of absolute combined profit or

combined loss (whichever is greater)
or
Assets
10% of combined assets for all segments
Reportable segments
But external revenue of reportable segments
must be 75% of total revenue
20
Remaining operating segments
Report separately if useful
Additional aggregation
opportunity:
Similar economic characteristics
Majority of aggregation
criteria met
All other segment category
21
Agenda
Scope and overview

The CODM
Operating segments
Reportable segments
Disclosure
The closing
Disclosure
Accounting policy
Segment information
Segment-specific
Reconciliations
Geographic information
Entity-wide
23
Agenda
Scope and overview

The CODM
Operating segments
Reportable segments
Disclosure
The closing
2011
2012 KPMG AS, a
registered
Norwegian
in Norway,
member is
firm
a subsidiary
of the KPMG
of KPMG
network
Europe
of independent
LLP and amember
memberfirms
firm affiliated
of the KPMG
with network of independent member
firms
KPMGaffiliated
International
with KPMG
Cooperative
International
(KPMG
Cooperative
International),
(KPMG
a Swiss
International),
entity. All rights
a Swiss
reserved.
entity. All rights reserved.
25
Which statements are true?
IFRS 8 applies to all entities
IFRS 8 applies to an entity with listed equity securities

IFRS 8 applies to an entity that is in the
process of listing debt securities
Segment information is not required if the information is
commercially sensitive and could harm the entity
26
The CODM can be a body or a person
There are 5 steps in applying IFRS 8
An entity can have more than one CODM
The CODM is a title rather than a function
27
The CODM chooses the entitys operating segments

Operating segments are based on information
regularly reviewed by the CODM
The CODM can choose which operating segments to aggregate
as long as there are at least 2 operating segments
Operating segments are aggregated only if they are
similar in a number of areas (as defined)
28
If any of the revenue, profit or loss, and asset threshold tests

is met, then that segment is a reportable segment
Any two of the revenue, profit or loss, and asset threshold tests
must be met to have a reportable segment
All of the revenue, profit or loss, and asset threshold tests
must be met to have a reportable segment
At least 75% of an entitys total external revenue must be
attributable to reportable segments
29
An entity always discloses a measure of profit or loss

An entity discloses a measure of total assets and liabilities
only if reported to the CODM regularly
An entity reconciles total revenue of all reportable segments
to total revenue in the financial statements
An entity discloses reconciliations for revenue, profit or loss,
assets, liabilities and other material items
30
1) The CODM is a function and not a

title
2) Operating segments are based on
results regularly reviewed by the
CODM
3) Operating segments are
aggregated only if strict similarity
tests are met
4) Reportable segments are based
on quantitative threshold tests
5) Both segment-specific and entitywide disclosures are required
Thank you!
2012 KPMG AS, registered in Norway, is a

subsidiary of KPMG Europe LLP and a member firm
of the KPMG network of independent member firms
affiliated with KPMG International Cooperative
(KPMG International), a Swiss entity. All rights
reserved.
The KPMG name, logo and cutting through

complexity are registered trademarks or trademarks
of KPMG International Cooperative (KPMG
International).

Segment Reporting: Ifrs 8

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Segment Reporting

What will you learn

1) Describe the CODM

CODM = chief operating decision maker

Overview: A management approach

Identify the CODM

Identify operating segments

Aggregate operating segments

Determine reportable segments

Disclose segment information

Step 1: Identify the CODM

Highest level of management

One CODM per reporting entity

CODM is a function and not a title

CODM could be a body (e.g. board

A question for you: CODM (1)

A question for you: CODM (2)

Step 2: Identify operating segments

Not an operating segment

Is the component able to earn revenues?

Which of these are valid bases for identifying operating segments?

Lila-Tech operating segments

A question for you: Operating segments

Operating segments might include

Certain corporate activity

Vertically integrated operations

Jointly controlled entities and

Step 3: Aggregate operating segments

Consistent with core principle?

Similar economic characteristics?

Similar economic characteristics

Long-term average gross margins

In our view, also consider the

In our view, also consider:

Scope and overview

Step 4: Determine reportable segments

10% of combined revenue for all segments

10% of absolute combined profit or

10% of combined assets for all segments

Remaining operating segments

Report separately if useful

All other segment category

Scope and overview

Scope and overview

Which statements are true?

IFRS 8 applies to all entities

IFRS 8 applies to an entity with listed equity securities

Which statements are true?

The CODM can be a body or a person

There are 5 steps in applying IFRS 8

An entity can have more than one CODM

The CODM is a title rather than a function

Which statements are true?

The CODM chooses the entitys operating segments

Which statements are true?

If any of the revenue, profit or loss, and asset threshold tests

Which statements are true?

An entity always discloses a measure of profit or loss

1) The CODM is a function and not a

2012 KPMG AS, registered in Norway, is a

The KPMG name, logo and cutting through

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