Ifrs 8

The Magician

Hi there,

Regarding IFRS 8 Operating Segments, If an organisation is engaged in say 3 or 4 different business activities would it need to disclose all activities for IFRS 8 requirements?

I've heard something about 75% and the 10% rule.

Reading literature on this standard just seems to confuse me further!

What an amazing unit though. I have learned so much!

Please help!

Steve Collings

The 10% rule relates to reportable operating segments. A "reportable" segment is an "operating" segment (ie maybe 3 or 4 areas of your business). An operating segment becomes reportable when:

- the operating segment's revenue to its external customers PLUS all intra-group transfers comes to 10% or more of the total revenue (revenue being external revenue to customers and intra-group transfers) of all the operating segments put together;
- the absolute profit or loss of the operating segment is 10% or more of the HIGHER of: (a) the combined reported profit of all operating segments in totality that hadn't reported a loss and (b) the combined reported loss of all operating segments that have reported a loss; or
- the operating segment's assets are 10% or more of the total assets of all operating segments.

In terms of the 75% materiality threshold this relates to the total "reportable" operating segments that have been identified. If the total external revenue reported by operating segments comes to less than 75% of the entity's total revenue then the entity has to identify additional operating segments until at least 75% of the entity's revenue is included in reportable segments. When this happens the entity identifies additional reportable segments even if they don't meet the 10% thresholds above.

Hope that helps.

Good luck

Steve

The Magician

Thanks a lot for your comprehensive reply.

I'll probably have to buy your book, dude!

I'm sure I got that one wrong now!

Each of the four business activities had monetary values and I just assumed you had to disclose all four separately?

I still don't understand it, and there is not really much coverage in my book!

It just seems so hard and would be better suited for the higher exams.

Anyway, 4 out of 6 questions correct from my exam isn't too bad.