IFRS 8 – Segments Reporting
Objective: To establish principles for reporting financial information by line of business and by geographical area.
IAS 14 applies to entities whose equity or debt securities are publicly traded and to entities in the process of issuing securities to the public. An enterprise must look to its organizational structure and internal reporting system for identifying its business segment and geographical segments. If internal segments are not geographical or product \ service based, then look to the next lower level of internal segmentation to identify. Segment is reportable if 10% from the entities is a segment. When one basis of segmentation is primary and the other secondary. Segment information should be based on the same accounting policies as the consolidate group or entity.
The Differences and Similarities between US GAAP Law and IFRS
Similarities: both US GAAP and IFRS are applicable to entities with public reporting requirements, and are based on a "management approach" in identifying the reportable segments"
Significant Differences:
IFRS | US Law GAAP | |
Segment disclosures are required only by entities whose equity or debt securities are publicly trade, or in the process of issuing such securities. | Like IFRS Segment disclosures are required only by entities whose equity or debt securities are publicly trade, or in the process of issuing such securities But unlike IFRS segment disclosure are required by other entities that are required to file financial statement with SEC. | Segment disclosures are required |
Disclosure is required for both business segments and geographical segments. | Unlike IFRS disclosures are required for segment that is reported to chief operation decision maker, with no distinction being made between business and geographical segment | Requirement of disclosure |
Significant Differences:
IFRS | US Law GAAP | |
All entities determine segment based on management approach, regardless of organization form. | Entity with a "matrix" form organization if the business managed in more than one way, must determine segment based on product and services | Determination of segments |
One basis of segmentation is primary and the other is secondary. Less information is required to be disclosed for secondary segments. The assessment of which is the primary segment reporting is based on the dominant source and nature of an entity risks and returns as well as entity's internal reporting structure. | Unlike IFRS there is only one basis segmentation which is based on the internal reporting structure of the entity. | Primary and secondary segments |
Segments are reportable if they meet one of three quantitative tests based on: (1) Revenue (2) Profit or Losses (3) Assets | Like IFRS Segments are reportable if they meet one of three quantitative tests based on: (1) Revenue (2) Profit or Losses (3) Assets | Reportable Segments |
The amount disclosed are based on the same accounting policies as the amount recognized in the financial statements | Unlike IFRS the amount disclosed are based on the amount reported to the chief operating decision maker or | Amount disclosed in segment presentation |
Comparative information is adjusted for changes in reportable segment. | Like IFRS Comparative information is adjusted for changes in reportable segment. | Comparative information |
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