Seminar "Operating Segments"
On 5 April 2013, the Deloitte Academy conducted a seminar on a topic that, although often considered to be outside the scope of IFRS training programmes, deserves due attention in our opinion. IFRS 8 Operating Segments itself is relatively new, and the standard’s concept is a bit unusual as it requires the disclosure of segment information based on the management approach. In other words, entities will report segments that correspond to internal management reports, even if those reports have been prepared according to internal requirements that may differ from IFRS. In addition, IFRS 8 contains quantitative thresholds for determining reportable segments, which is also extrinsic to principle-based IFRS. However, there is a rational explanation for this. The disclosure of segment information based on internal reporting allows users to review an entity's operations from the same perspective as the management, and helps them to predict the actions or reactions of the management to changes in the external environment. Clear quantitative thresholds in IFRS 8 come from SFAS 131 Segment Reporting (under the old codification), as the text of SFAS 131 was used for IFRS 8.
During the seminar we decided to launch a simulation in the form of a team discussion of the advantages and disadvantages of an approach to segment reporting based on the entity's products and services and the geographical areas in which it operates, as compared to segment reporting based on the management approach.
We also reviewed the best business practices of segment reporting applied by leaders in different industries (agriculture, energy, manufacturing, banking, etc.). Moreover, we deliberately selected different approaches to segmentation for each industry in order to demonstrate the link to the internal reporting system.
The seminar materials can be found here.