IFRS 8 ‘Operating segments’ was issued towards the end of 2006 and will apply to periods beginning on or after 1 January 2009.
The new IFRS 8 ‘Operating segments’ will replace IAS 14 ‘Segment reporting’ and apply only to listed entities. The new standard broadly follows the provisions of the exposure draft discussed in the July 2006 edition of Financial Reporting and represents part of the short-term convergence project between IFRS and US GAAP. The new standard follows closely the requirements of FASB Statement No. 131 ‘Disclosures about segments of an enterprise and related information’.
Key Features Of IFRS 8
- Disclosable operating segments include any component selling primarily or exclusively to other components.
- Measurement of reported items is by reference to how they are reported internally and, as a consequence, reconciliations between the reported segment information and that reported in the financial statements must be included in the notes to the accounts.
- Disclosure of revenue from products and services, the countries in which the revenues are earned and assets held, and about major customers is required irrespective of whether this information is used by operational decision-makers.
Smith & Williamson Commentary
While the first date for mandatory application may be a couple of years away, the need for comparative information brings implementation much nearer. Those responsible for preparing financial statements should start to think now about the additional sensitivity of some of the information that may need to be disclosed and how best to present this within the confines of the standard.
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