Chapter 13
SEGMENT REPORTING- CORE PRINCIPLE
Overview
The core principle of the standard on segment
reporting (PFRS 8) emphasises the importance of
segment disclosures that enables users of the
financial statements to evaluate the nature and
financial effects of the operations, and the
economic environment in which an entity
operates.
SEGMENT REPORTING- disclosure of certain
financial information about the products and
services an entity produces and the geographical
areas in which an entity operates.
 PURPOSE- to enable investors and
users make better assessment of
each business activity leading to the
understanding of the
PERFORMANCE of the entity as a
WHOLE.
SCOPE
PFRS 8 applies to the separate or individual
financial statements of an entity (and to the
consolidated financial statements of a group with
a parent):
a. Whose debt or equity instruments are
traded in a public market
b. That files, or is in the process of filing, its
(consolidated) financial statements with a
securities commission or other regulatory
organisation for the purpose of issuing any
class of instruments in a public market.
IDENTIFICATION OF OPERATING SEGMENTS
PFRS 8 defines an operating segment as a
component of an entity:
 that engages in business activities
from which it may earn revenues
and incur expenses (including
revenues and expenses relating to
transactions with other components
of the same entity) 
 whose operating results are
reviewed regularly by the entity's
chief operating decision maker to
make decisions about resources to
be allocated to the segment and
assess its performance and  Two or more operating segments may be
 for which discrete financial
information is available
CHIEF OPERATING DECISION MAKER ( CODM)
 NOT necessarily a manager with a
specific title.
 Function- allocate resources to the
segments and assess their
performance.
IDENTIFYING OPERATING SEGMENT
Management Approach
 Identified through the basis of internal
reports that are regularly viewed by the
CODM
 For internal management relating
purposes
IDENTIFICATION OF REPORTABLE
SEGMENTS
Once an operating segment has been identified
the entity needs to report segment information if
the segment meets any of the following
quantitative thresholds:
1. its reported revenue (external and inter-
segment) is 10% or more of the combined
revenue, internal and external, of all
operating segments
2. its reported profit or loss is 10% or more of
the greater, in absolute amount, of
a. the combined profit of all operating
segments that did not report a loss
and
b. the combined loss of all operating
segments that reported a loss or
3. its assets are 10% or more of the combined
assets of all operating segments.
OVERALL SIZE TEST- 75% THRESHOLD
PFRS 8 states that if the total external turnover
reported by the operating segments identified by
the size criteria is less than 75% of total entity
revenue then additional segments need to be
reported on until the 75% level is reached.
AGGREGATION OF SEGMENTS
combined into a single operating segment if:
Aggregation is consistent with the core
principle of this standard, to allow users of the
 financial statements make informed decisions
based on the financial statements.
The segments have similar economic
characteristics and are similar in each of the
following areas:
 nature of the products and services
 nature of the production process
 type or class of customer for their products
and services
 methods used to distribute their products
or provide their services, and
 if applicable, the nature of the regulatory
environment, for example, banking insurance or
public utilities.
LIMIT TO THE NUMBER OF SEGMENT
 if the number of reportable segment
exceeds 10- information become too
detailed and consequently lose its
usefulness.
SEGMENT NO LONGER REPORTABLE
 shall continue to be reported separately in
the current period even if it no longer
meets any of the 10% quantitative
threshold for reportability.
SEGMENT BECOMING REPORTABLE
 segment data for a prior period presented
for comparative purposes shall be
RESTATED to reflect the newly reportable
segment even if that segment did not
satisfy any of the quantitative threshold in
the prior period.
 NOT BE RESTATED if the necessary
information is NOT available and the cost
to develop it would be excessive.
INFORMATION TO BE DISCLOSED FOR EACH
SEGMENT
What information to disclose?
Once the segment has been identified as
reportable, the entity must disclose the following
information:
1. General information:
o Factors used to identify reportable
operating segments;
o Judgements used in applying the
aggregation criteria;
o Types of products and services
generating revenues.
2. Information about profit or loss, assets
and liabilities
o Measurement of these amounts
shall be on the same basis as
reported to chief operating decision
maker;
o On top of the total amounts of profit
or loss, assets and liabilities, the
entity shall present the information
about specified revenues and
expenses (revenues from external
customers, internal revenues,
depreciation and others);
o Entity should provide the
explanation of the measurement
basis, including the explanation of
nature of differences between the
amounts reported per segments and
total entity's amounts
3. Reconciliations
The entity should reconcile total amount
per operating segments with total amount
reported in the entity's financial
statements for:
o Revenues;
o Profit or loss;
o Assets;
o Liabilities;
o Other material information.
4. Entity-wide information- additional
information.
o Information about products and
services;
 Revenue from external
customers for each product
and service
o Information about geographical
areas, namely:
 Revenues from external
customers (in the country of
domicile and in foreign
countries;
 Certain non-current assets(in
the country of domicile and in
foreign countries;
o Information about major customers
 Total amount
 Identity of segment.