IFRS 8 – Operating Segments
IFRS 8 requires entities to provide information about operating segments so that users can evaluate the nature and financial performance of an entity’s different business activities and the economic environments in which it operates.
It uses the “management approach”—segments are based on internal reports reviewed by the Chief Operating Decision Maker (CODM).
1. Definition and Key Concepts
Operating Segment
A component of an entity:
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That engages in business activities from which it may earn revenue and incur expenses.
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Whose operating results are reviewed regularly by the CODM.
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For which discrete financial information is available.
Example:
A company with three divisions:
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Electronics
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Clothing
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Home Appliances
If the CEO reviews results by division → each division is an operating segment.
Chief Operating Decision Maker (CODM)
The person or group responsible for allocating resources and assessing performance.
Examples: CEO, COO, or a management committee.
Reportable Segments
Operating segments must be reported if they meet any of the quantitative thresholds:
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Revenue ≥ 10% of total segment revenue
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Profit or loss ≥ 10% of total segment profit/loss
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Assets ≥ 10% of total segment assets
Example:
Segments revenue:
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Electronics: $40m
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Clothing: $5m
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Home Appliances: $8m
Total revenue = $53m → 10% = $5.3m
→ Electronics: reportable
→ Clothing: borderline but below threshold (may still be reported voluntarily)
→ Home Appliances: reportable if meets other thresholds.
2. Required Disclosures for Reportable Segments
General Information
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Factors used to identify segments
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Type of products/services for each segment
Information About Profit or Loss
Entities must disclose for each reportable segment:
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Revenue (internal & external)
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Segment profit or loss
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Interest revenue/expense
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Depreciation & amortization
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Material non-cash items (e.g., impairment)
Example:
Segment: Electronics
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Revenue: $40m
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Profit: $6m
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Depreciation: $1m
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Impairment loss: $0.5m
→ All must be disclosed.
Segment Assets and Liabilities
Only required if reviewed by CODM.
Example:
If the CEO reviews assets for each segment but not liabilities → only asset disclosure is required.
3. Measurement Principles
Basis of Segmentation
Amounts reported must follow the same accounting policies used in internal management reports—may differ from IFRS amounts.
Example:
Management uses cash basis for internal reporting → segment results follow this, with reconciliation shown later.
Reconciliations Required
Reconcile segment totals to entity totals:
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Total segment revenue → entity revenue
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Total segment profit → entity profit
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Total segment assets → entity assets
Example:
Total segment profit: $12m
Adjustments (IFRS-based): –$2m
→ Entity profit = $10m (reconciled and disclosed)
4. Entity-wide Disclosures
Required even if only one reportable segment exists.
Products and Services
Revenue by major product lines.
Geographical Areas
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Revenue from home country vs foreign countries
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Non-current assets by location
Example:
Revenue:
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Cambodia: $20m
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Vietnam: $15m
Non-current assets: -
Cambodia: $8m
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Vietnam: $3m
→ Must be disclosed regardless of segment structure.
Major Customers
If revenues from a single customer ≥ 10% of total revenue → disclose.
Example:
Company A earns $100m total revenue.
Customer X contributes $15m → significant; must disclose (but not name the customer).
5. Practical Example – Segment Reporting Summary
A manufacturing group has 3 operating segments:
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Food
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Beverages
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Packaging
CODM reviews profit and assets by segment.
Revenue (external):
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Food: $50m
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Beverages: $30m
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Packaging: $8m
Total: $88m → 10% threshold = $8.8m
Reportable segments:
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Food → Yes
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Beverages → Yes
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Packaging → Below threshold → not reportable unless management chooses voluntarily.
Disclose separately:
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Revenues, segment profits, depreciation, impairment
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Geographic revenue (Asia, Europe)
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Major customer (buying 12% of total revenue)