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IFRS8OperatingSegments

IFRS8
OperatingSegments

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IFRS8OperatingSegments

Contents
1.Objective....................................................................................................................................................5
2.Scope.........................................................................................................................................................5
3.1Definition............................................................................................................................................6
3.2RevenuesandExpenses......................................................................................................................6
3.3VerticallyIntegratedOperations.........................................................................................................7
3.4DiscontinuedOperations....................................................................................................................8
3.5Operationsbeingwounddown..........................................................................................................8
3.8JointVentures.....................................................................................................................................8
5.AggregationCriteria..................................................................................................................................9
6.3SeventyFivePercentCriteria............................................................................................................10
6.4AggregationofSegments.................................................................................................................11
6.5Disclosureofothersegments...........................................................................................................11
8.Practicallimitonnumberofreportablesegments.................................................................................12
9.Disclosures..............................................................................................................................................12
9.1GeneralInformation.........................................................................................................................12
9.2DetailedDisclosuresofmeasureofprofitorloss,assetsandliabilities...........................................12
9.3Measurement....................................................................................................................................14
9.3.1ProfitorlossMeasure................................................................................................................14
9.3.2Morethanonemeasureused....................................................................................................15
9.3.4Disclosureofmeasurementbasis..............................................................................................16
9.4Reconciliations..................................................................................................................................16
9.5Restatementofpreviouslyreportedinformation............................................................................17
9.6EntityWideDisclosures.....................................................................................................................17
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IFRS8OperatingSegments

9.6.1Informationaboutproductsandservices..................................................................................17
9.6.2Informationaboutgeographicalareas......................................................................................17
9.6.3Informationaboutmajorcustomers.........................................................................................18
10.Howtocheckthatalldisclosurerequirementsrelatingtothisstandardhasbeenincorporated(For
eachdisclosuremarkYes,NoorNotApplicable)....................................................................................24

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IFRS8OperatingSegments

Yes

No

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IFRS8OperatingSegments

1.Objective
Forcompaniesthatoperateinavarietyofclassesofbusiness,geographicallocations,
regulatoryenvironments,segmentinformationisrequiredsoastoenablemanagement:
a. Tomonitorperformancewithinitsspecificbusinessandgeographicalregions
b. Devisestrategiesandfocusattentiontowardscounteringadversetrendsorexploiting
opportunities
c. Toexplaininvestorsandmarketmanyfactorsthatcontributestotheresultoftheyear.
Thesefactorscouldbedevelopmentsintroducedbythemanagementoreventsoutside
managementcontrol.

2.Scope
IFRS8appliestotheseparateorindividualfinancialstatementsofanentity(andtothe
consolidatedfinancialstatementsofagroupwithaparent):

Whosedebtorequityinstrumentsaretradedinapublicmarket,or
Intendstodosobyfilingwithappropriateregulatoryauthority

Butdisclosesinformation
aboutsegments

Ifanentityisnotrequired

toapplyIFRS8

Whichisnoncompliant
withIFRS8

Itshallnotdescribeitas
segmentinformation

Whenbothseparateandconsolidatedfinancialstatementsfortheparentarepresentedina
singlefinancialreport,segmentinformationneedbepresentedonlyonthebasisofthe
consolidatedfinancialstatements

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IFRS8OperatingSegments

3.OperatingSegments
3.1Definition
IFRS8definesanoperatingsegmentasacomponentofanentity:

Thatengagesinbusinessactivitiesfromwhichitmayearnrevenuesandincurexpenses
(includingwithothercomponentsofthesameentity)

Whoseoperatingresultsarereviewedregularlybytheentity'schiefoperatingdecision
makertomakedecisionsaboutresourcestobeallocatedtothesegmentandassessits
performance
(Thetermchiefoperatingdecisionmakeridentifiesafunction,notnecessarilyatitle.
Often,itischiefexecutiveofficerorchiefoperatingofficer.)

Forwhichdiscretefinancialinformationisavailable

Whereas,IndianGAAP,Requirestwosetofsegmentstobeidentifiedonebasedonrelated
productsorservicesandanotherongeographicalareas

3.2RevenuesandExpenses
Anoperatingsegmentmayengageinbusinessactivitiesfromwhichithasyettoearnrevenue,
example,startupoperations.
Example
Anentitywhosesoleactivityisthedevelopmentofanewproductmayonlybeincurring
researchanddevelopmentexpenseswithoutanyrevenueyetbeingearnedfromtheproduct,
yetitwouldbetreatedasOperatingSegment

Segmentsthatarerundownorliquidatedcanalsomeetthedefinitionofoperatingsegmentsif
resultsarereviewedbychiefoperatingofficer.

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IFRS8OperatingSegments

Noteverypartofanentityisnecessarilyanoperatingsegment.Example,acorporate
headquartersmaynotearnrevenueormayearnrevenuesthatareonlyincidentaltothe
activitiesoftheentityandwouldnotbeoperatingsegments.
Example
Acorporateheadquarterscarryingoutsupportfunctionsintheareasofaccounting,IT,legal,
HR,InternalAuditwouldnormallynotbeanoperatingsegmentsincetherevenueearnedand
expensesincurredarenotincidentaltotheentitysactivities.

Aresearchanddevelopmentfunctioncanbeaoperatingsegmentprovideddiscretefinancial
informationisregularlyreviewedbythechiefoperatingdecisionmaker.

3.3VerticallyIntegratedOperations
Apartofanentitythatearnsrevenueandincursexpensesrelatingtotransactionswithother
componentsofthesameentitymayqualifyasanoperatingsegmentevenifallofitsrevenue
andexpensesderivefromsuchintragrouptransactions.
Suchasituationmayoccurinverticallyintegratedorganization.
Example
Inoilindustrywheretheactivitiesofexplorationandproduction(upstreamactivities)and
refiningandmarketing(downstreamactivities)arecarriedoutwithinoneentity.
Wheretransferpricesarechargedbetweenanentitysstagesofproduction(likeinoilandgas
companies),evenifthesetransferpricesarenotreviewedbythechiefoperatingofficer,these
activitieswouldbeconsideredasOperatingSegments.

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IFRS8OperatingSegments

3.4DiscontinuedOperations
AdiscontinuedoperationcanmeetdefinitionofOperatingsegment,ifcontinuestoengagein
businessactivities,resultsregularlyreviewedbychiefoperatingofficeranddiscretefinancial
informationisavailableaboutit.
Example
Aninsurancecompanydiscontinuesitsworkerscompensationbusiness.However,forinternal
purposes,separatefinancialresultsaremaintainedforthisbusinessandareregularlyreviewed
bychiefoperatingdecisionmaker.Thus,theoperationwouldcontinuetomeetdefinitionofan
operatingsegment.

3.5Operationsbeingwounddown
ItcanalsomeetthedefinitionofOperatingSegmentswheretheseparatefinancialresultsof
suchoperationsaremaintainedandcontinuetobereviewedbychiefoperatingdecisionmaker.

3.8JointVentures
TheycanqualifyasOperatingSegmentprovided:

Theseoperationsaremanagedseparately
TheymeetthedefinitionofIFRS8Operatingsegments

Inthatcase,profitorlossandassetinformationregardingthejointventureactivitiesthat
comprisethesegmentwouldbedisclosed.
Approachestoidentifyreportablesegments:
Aconditionforidentifyinganoperatingsegmentisthatitsresultsshouldberegularlyreviewed
bychiefoperatingdecisionmaker.Thisapproachtoidentifysegmentsisknownas
ManagementApproach.

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