Operating segments : the usefulness of IFRS 8
Date
2012
Authors
Crawford, L.
Extance, H.
Helliar, C.
Power, D.
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Report
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Abstract
Segmental reporting has always been a contentious issue for standard setters. The introduction of International Financial Reporting Standard (IFRS) 8 ‘Operating Segments’ which became effective for accounting periods starting on or after 1 January 2009 is no different in this regard. This standard replaced International Accounting Standard (IAS) 14 (Revised) and converged, except for minor differences, with its US counterpart Statement of Financial Accounting Standard (SFAS) 131.
At the time when IFRS 8 was proposed by the International Accounting Standards Board (IASB) and subsequently when it was endorsed by the European Parliament, a number of concerns were raised both in submissions to the standard setter as well as in the financial press. Specifically, concern was expressed about the management approach underpinning IFRS 8 which requires disclosure of segmental information which has been prepared and measured for internal reporting to a Chief Operating Decision Maker (CODM). Worries were also highlighted about the lack of guidance in the standard as to who was the CODM, the change from primary/secondary segment disclosures under IFRS 8, and the permission for non-IFRS measures to be used when reporting on segmental performance.
This report conducts a more detailed analysis of how a sample of UK companies implemented IFRS 8. It also reports on the views of a sample of preparers, users and auditors of financial statements about their experiences with the new standard.
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Copyright 2012 Institute of Chartered Accountants of Scotland