EXECUTIVE SUMMARY AASB 8 is an important Accounting Standard from the financial information reporting perspective. It ensures that the entity has to disclose enough information to the user of financial information about the economic activities the entity is involved into and the scope or spread of these activities. The standard requires the entity to provide information about the reportable operating segments of the entity. Operating segments are the components of the entity of which separate financial information is available and it is regularly evaluated by the management – more specifically – the CODM – i.e. the Chief Operating Decision Maker to assess the performance of the particular component and to allocate resources in appropriate …show more content…
The major focus of this report is on this concept. This report also tries to focus on making a thorough analysis of the management approach and also provide an in-depth discussion on operating segments. The report also discusses the effects of using the management approach on the financial reports of companies by analysing the annual reports of Woolworth and Westpac. Differences between AASB 8 and the old accounting standards on segment reporting? The segment reporting is generated information and disclose company’s operation in the market with different rate of profitability, different degree of risk, and also for the different opportunities for growth.(Arthur, Luff, & Keet, 2012) As core principle of Operating segments states: an entity shall disclose information to enable users of its financial statement to evaluate the nature and financial effects of the business activities in which it engages and the economic environments in which it operates. (AASB 8) Or it can understand like this, operating segment is reported in a specific way and consistent with internal reporting provided to the chief decision maker. 1.1 AASB 114 & Key differences compared with AASB 8 The old standard on segment reporting was AASB114, and the new standard AASB 8 was applied beginning on or after 1 January 2009. The significant differences between the AASB114 and AASB 8, such as: AASB 114: was applied on 15 July
In 1973 the Financial Accounting Standards Board (FASB) was established to set the financial accounting standards in the United States of America for nongovernmental entities. These standards are collectively called U.S. Generally accepted Accounting Principles, or U.S. GAAP. The Securities and Exchange Commission (SEC) and the American Institute of Certified Public Accountants acknowledge the authority of these standards (FASB, n.d). A “proven, independent due process” is used to collect the viewpoints of the financial statements prepares and users for the constant improvement of these standards. An Accounting Status Update(ASU) is not an authoritative source however documents the amendments to communicate the changes in the FASB Codification for a user to understand the reason and future of those changes (FASB, n.d).
The purpose of creating FASB is to establish standards of financial accounting that control the establishment of financial reports by nongovernmental organizations. This instance is identified as the number one authority by the SEC and the American Institute of Certified Public.FASB Accounting Standards Codification serves as a reference guide of authoritative standards for accounting and reporting, to be applied by nongovernmental organizations. Some examples are; ASC 830-230-55-1 that can identify as Statement of Cash Flows for Manufacturing Organization with Foreign Operations, ASC 926-330-35-1 can be justified as Products Held for Sale, ASC 954-440-25-2 identified as Continuing Care Retirement Community, ASC 505-20-50–1 means Equity, Stock Dividends and Stock Split and Disclosure, ASC 710-10-05-6 describe as Employees Compensations..
As stated earlier, the IASB arose from specific needs of the accounting industry and the public. As international trade has increased, the need for transnational accounting information has increased as well. This sparked the demand for development of international accounting standards to make financial data between countries more comparable. In 1973, the International Accounting Standards Committee (IASC) was formed to develop these international standards. The standards issued by the IASC, prior to 2001, were called International Accounting Standards (IASs). In 2001, the IASC made the International Accounting Standards Board (IASB) the official international standard-setting body. The standards issued by the IASB are called International Financial Reporting Standards (IFRSs) (Schroeder, Clark, & Cathey, 2011, p. 82-87).
The Financial Accounting Standards Board goes through an elaborate information gathering process before issuing their standards. Firstly, an issue is identified and placed on the Board 's agenda by the Emerging Issues Task Force. Secondly, a task force of knowledgeable persons is appointed to advise the Board on the issue. Thirdly, the Board 's technical staff investigates the issue. Fourthly, a discussion memorandum on the issue is then written and distributed to interested parties. Fifthly, the
Reportable segments are identified from the operating segments complying with AASB 8 para.11, and separate information about each segment would be reported. AASB 8 para.13 shows quantitative thresholds that a separate information about a segment would be reported if meets any of the thresholds tabulated in Table 1.
The Codification’s goal is to clarify the company of thousands of U.S. authoritative accounting announcements published by diverse standard-setters. Therefore, to accomplish this objective, the FASB sponsored a project to incorporate and typically adapt all related accounting publication announced by the standard-setters of the U.S. in conjunction with those of the FASB, the Emerging Issues Task Force (EITF) and the American Institute of Certified Public Accountants
The AASB 108 specifically deals with the disclosure requirements relating to change in accounting policies and estimates and accounting errors. It is the Australian equivalent of IAS 8. It seeks companies to disclose the selection any change that takes place in their accounting policies and accounting estimates and also disclose the correction of errors (Carlin and Finch, 2008).
A segment is reportable is a segment considered to be significant to an enterprise’s operations. At least one has passed of three 10% tests or has been identified as being reportable through other criteria. (1) Revenue: If 10% or more of the revenue of a firm is derived from sales to any single customer, that fact and the amount of revenue from each customer must be disclosed. In addition, if 10% or more of the revenue is derived from sales to the federal government, a state government, a local government, or a foreign government, that fact and the amount of revenue must be disclosed; (2) Operating profit or loss: the absolute amount of segment profit or loss is 10% or more than the greater. (3) Segment assets: segment assets are 10% or more of total segment assets.
This paper will analyze these views as they apply to the discloser of segment information for public entities as required by topic 280 of the FASB accounting standards codification, and discussed in Statement of Financial Standards No. 131 (“SFAS 131). The paper is structured as follows: Section II provides an overview of the objective and general purpose of financial reporting and the qualitative characteristics off useful financial information as determined by the Financial Accounting Standards Board (“FASB”), section III introduces the concept of segment reporting and outlines the requirements for disclosures of segment information for public companies, section IV evaluates the relevance of
The information in this report regarding the accounting standards for private companies is as stated in the proposal stage. The three options discussed are options being considered and the Accounting Standards Board (AcSB) has issued an
AASB 8 applies to annual reporting period beginning on/after 1 Jan 2009 and supersedes AASB 114 Segment Reporting when adopted.
This report will provide an overview as to what Segment Reporting is and how is it reported in the annual reports. This report will also touch basis on issues involved in allowing the management to measure the different operating segments. A brief discussion on how entity wide disclosures need to be made for major customers under AASB 8. To get a better understanding on segment reporting, we have compared the annual reports of Telstra Group and BHP Billiton, to view the different approaches or similarities in reporting segment information.
TIER 1:- Tier 1 reporting requirements are applicable for the financial statements of following entities:-
International Financial Reporting Standard (IFRS 8) ‘Operating Segments’ is the first Standard of the International Accounting Standards Board (IASB) to be subject to a post-implementation review (PIR). IFRS 8 allows investors and other users of financial statements to see the company’s operations through the eyes of management (‘the management-perspective approach’) would enable investors to understand the risks that management face each day and to assess how well those risks are managed.
IFRS 8 (‘the standard’) aligns the identification and reporting of operating segments with internal management reporting. Segment reporting under IFRS 8 should highlight the information and measures that management believes are important and are used to make key decisions. It should also provide a better link between the financial statements and the information reported in management commentaries such as the Operating and Financial Review or Management Discussion and Analysis. The standard converges IFRS with US Accounting Standard SFAS 131 ‘Disclosure about Segments of an Enterprise and Related Information’. This publication explains the key requirements of the standard and some practical issues for entities to consider when it is applied for the first time.