Do The Requirements Of Ifrs 8 Operating Segments Enhance Quality Of Information Available For Financial Statement Users?

Despite those enormous advantages, it has been argued that IFRSS adoption lead to significant costs. The main argument is that IFRSs do not consider local needs and priorities as every country has their own ‘business environment, legal systems, cultures, language and political environment’ (Henderson and Peirson, 2000 cited from Malthus, S., 2004). However, to overcome this problem, IASB can accommodate flexible reporting standards that enable companies to choose alternatives that are more suitable for their external condition. It is opinion of some opponents of IFRS adoption that IAS is ‘insufficiently detailed’ (Uddin,M.S., 2005, p.4) that require accountants’ and auditor’ professional judgment. However, overly detail might be contra productive and not flexible in anticipating every changes and differences.

Epstein, B. J., & Jermakowicz, E. K. (2009, April). IFRS Converges to U.S. GAAP on Segment Reporting. Retrieved January 30, 2013, from Journal of Accountancy: http://www.journalofaccountancy.com/Issues/2009/Apr/20081008.ht

In September 2002 the IASB and the FASB agreed to work together, in consultation with other national and regional bodies, to remove the differences between international standards and US GAAP. (Dorata, 2008) However, the convergence of IFRS and FASB is coming to the end. (Golden, 2013)

UK’s IFRSs are designed to make it easier to compare the performance of organizations in different countries, rather than each country maintaining its own GAAP, which makes such comparisons difficult. All listed EU companies have been required to use IFRSs since 2005. The adoption of IFRSs by the private sector is expected to have various benefits for both companies and investors; including (1) UK’s IFRSs will remove the need for companies with foreign subsidiaries to translate the accounts for consolidation with the parent company accounts. Also (2) it will be easier for investors to make informed decisions about the performance of companies in different countries because of the increased transparency and a better understanding of financial statements.

Entity-wide disclosures are required under Accounting Standards Codification (ASC) 280-10-50-40 through 280-10-50-42. The disclosures are required because every corporation does not report information in a similar fashion, and the disclosures would provide comparability of the financial statements among entities. For example, if a corporation uses a geographic approach in its financial statements, disclosing certain information about the products or services sold will make comparability to other companies much easier. The disclosures will also help with comparability within an entity if they decide to choose another method of reporting operating segments in the future. There are three types of entity-wide disclosures; products and services, geographic areas, and/or major customers. Every public company has to comply with the disclosures, even if the company has one reportable segment. The only exception to the entity-wide disclosures is if it is impractical to provide the information, such as it would be extremely costly to the corporation, or if the “internal reporting systems are not capable of gathering financial information by product or service by geographic area.” A disclosure should be made when entity-wide disclosures are impractical.

The U.S is moving toward IFRS (Forgeas, 2008). In the near future, all US company may need to report financial statements under IFRS. This makes the adaptation of IFRS unavoidable. Recently, some large multinational

As the business environment grows and companies find new ways to expand into their respective - or even new – markets, it is important that reporting standards stay up to date with changes and continue to assist companies in providing their users with useful accounting information. Information is labelled as being useful when it meets the

With the growth of international business there is a need to standardize financial statements globally. Presently there are “approximately 120 foreign private issuers currently that report to the Commission using IFRS financial statements.” By standardizing accounting practices investors will be able to make informed decisions based on comparability and accuracy of financial statements. The SEC released this statement in 2008, “We believe that IFRS has the potential to best provide the common platform on which companies can report and investors can compare financial information.” The SEC has created a “Roadmap” or plan to convert US GAAP over to IFRS. According to The Committee of

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

IASB. 2010, "The Conceptual Framework for Financial Reporting" IFRS, pp. A21- A38, viewed 23 April 2014,

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.

IFRS addresses practical application issues that any entity is supposed and expected to encounter within the standards. These practical issues provide a comprehensive analysis. For instance, IFRS 1 provides extensive guidelines “…and addresses practical application issues that a first-time adopter of IFRSs could expect to encounter when transitioning to IFRSs”. (KPMG, 2009). The IFRS, being principle-based, generally do not contradict with Generally Accepted

Segment reporting is the disaggregation of a reporting entity’s financial reports into segments. This paper investigates whether segment reporting is worthwhile and whether the requirements of the new segment-reporting standard (IFRS 8) have had an impact on the way companies disclose segment information.

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.

In the year 2006, IASB issued IFRS 8 Operating Segments replacing the IAS 14. IFRS 8 replaced IAS 14 because the revenue earned from the sales to external parties was reported in a limited segments and did not require separating the segments accordingly to the different stages of a vertically integrated entity. The new IFRS 8 requires the report to separate in segments for the Chief of Decision Maker (CODM) purposely to measure the allocation of resources for the segments and evaluating or assessing the performance (Anon, 2014).