Research in Accounting Regulation 29 (2017) 119–128

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Research in Accounting Regulation

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Regular paper

Geographic segment disclosures under IFRS 8: Changes in materiality

and fineness by European, Australian and New Zealand blue chip
companies
Sandra J. Cereola a,∗, Nancy B. Nichols a, Donna L. Street b
a
James Madison University, Harrisonburg, VA, USA
b
University of Dayton, Dayton, OH, USA

a r t i c l e i n f o a b s t r a c t

Article history: This study examines how the adoption of International Financial Reporting Standard (IFRS) 8, Operat-
Available online 7 November 2017 ing Segments, changed the entity-wide geographic segment reporting by European, Australian and New
Zealand blue chip companies. The focus is on the revised requirements that companies disclose revenues
Keywords:
International Financial Reporting Standards for the country of domicile and other material countries. Specifically, it investigates the materiality level
IFRS 8 companies use to determine material countries and whether the revised requirements result in a finer set
Geographic areas of geographic information than previously disclosed under International Accounting Standard (IAS) 14R.
Segment reporting The study finds a significant decrease in the number of companies reporting only broad geographic
IASB post-implementation review regions and a significant increase in the number of companies reporting country specific segments and a
Materiality mix of countries and regions after the adoption of IFRS 8. The increase in companies reporting country
Fineness specific and mixed segments indicates that the requirement to disclose material countries under IFRS 8
resulted in a significant number of companies reporting disaggregated revenues at the individual country
level. To the extent country specific information is more useful, financial analysts and the International
Accounting Standards Board (IASB) should welcome this result.
All three fineness measures increase significantly with the adoption of IFRS 8. These results indicate
that the adoption of IFRS 8 did improve the fineness of the geographic disclosures provided by companies
and suggests that the geographic data provided under IFRS 8 is less aggregated than the disclosures under
IAS 14R.
© 2017 Elsevier Ltd. All rights reserved.

The International Accounting Standards Board (IASB) issued In-
ternational Financial Reporting Standard (IFRS) 8, Operating Seg-
ments in November 2006, effective for periods beginning on or af-
ter January 1, 2009 (IASB, 2006). The revision of International Ac-
counting Standard (IAS) 14R, Segment Reporting (International Ac-
counting Standards Committee (IASC) 1997), focused on reducing
differences between IFRSs and the US Statement of Financial Ac-
counting Standard (SFAS) 131, Disclosures about Segments of an En-
terprise and Related Information (now Accounting Standards Codi-
fication (ASC) 280) (Financial Accounting Standards Board (FASB),
1997). IFRS 8 effectively adopts SFAS 131, requiring operating seg-
ment and entity-wide disclosures. The entity-wide disclosures re-
quire companies to disclose two items of geographical informa-
tion: revenues from external customers and non-current assets.1
The entity-wide disclosures replace the IAS 14R secondary segment
disclosures that required the disclosure of revenue, assets, and cap-
ital expenditures.
IFRS 8 requires geographic disclosures for an entity’s country
of domicile, all foreign countries in the aggregate, and individ-
ual countries, if material, with no defined materiality threshold.
In contrast, IAS 14R provides a 10% materiality threshold for de-
termining when a geographic segment must be reported. The IASB
references the FASB’s Basis for Conclusions (BC) in support of its
decision to adopt the requirements of SFAS 131 (IASB, 2006, BC52).
The FASB’s BC includes two specific benefits for country informa-
tion. The first benefit is a reduced burden on preparers since com-
panies are likely to review countries with material operations. The
second benefit is that country specific information is more useful;

∗ 1
Corresponding author. All companies must report the entity-wide geographic information unless the
E-mail addresses: cereolsj@jmu.edu (S.J. Cereola), nicholnb@jmu.edu information is provided as part of the reportable segment disclosures (IFRS 8, para-
(N.B. Nichols), dstreet1@udayton.edu (D.L. Street). graph 31).

https://doi.org/10.1016/j.racreg.2017.09.003
1052-0457/© 2017 Elsevier Ltd. All rights reserved.
120 S.J. Cereola et al. / Research in Accounting Regulation 29 (2017) 119–128
it is easier to interpret than more aggregated information, espe-
cially when assessing economic risk concentrations. The BC specif-
ically notes that “countries in contiguous areas often experience
different rates of growth and other differences in economic condi-
tions” (SFAS 131, BC paragraph 105).
This study evaluates the geographic information disclosed by
the largest European, Australian and New Zealand companies in
the year of adoption of IFRS 8, typically in their 2009 annual re-
ports. It specifically focuses on the issues of materiality and fine-
ness. The materiality analysis investigates the threshold levels used
by management in determining the disclosure of individual coun-
try information. The fineness analysis investigates whether geo-
graphic disclosures under IFRS 8 are “finer” than the disclosures
under IAS 14R. Fineness is defined as the extent to which total rev-
enues are disaggregated into specifically defined geographic areas
and the aggregation level of the geographic areas reported. Ana-
lysts argue that the more disaggregated the level of disclosure, es-
pecially disaggregation at the country specific level, the more use-
ful the information (Association for Investment Management and
Research (AIMR), 1992). The study also provides a limited analy-
sis of disclosure differences between European and Australian and
New Zealand (AU/NZ) companies.
The IASB completed the post-implementation review (PIR)
of IFRS 8 in July 2013 (IASB, 2013) and issued an Exposure
Draft, Improvements to IFRS 8 Operating Segments, in March 2017
(IASB, 2017). Investor feedback obtained during the PIR ques-
tions whether the geographical information provided under IFRS
8 distinguishes between different regions in a way that is use-
ful for investors. The Exposure Draft (ED) does not propose any
amendments to the entity-wide disclosures because the PIR con-
cludes that the “feedback received did not identify a clear or con-
sistent problem that we need to address and, consequently, we
do not think this area warrants any further action at this time”
(IASB, 2013, p. 24). The findings of this study will inform the IASB’s
PIR project team and address the concern raised by some investors
regarding the level of geographic information provided under the
new standard.
The next section reviews the published geographic segment lit-
erature. The sample selection, research methodology, and results
sections follow. The last section includes the study’s summary and
conclusions.
Literature review
Numerous studies investigate the broad topic of segment re-
porting under SFAS 131 and IFRS 8. See Moehrle, Mohrman,
Reynolds-Moehrle, and Stuerke (2009) and Nichols, Street, and
Tarca (2013), for reviews of segment reporting literature includ-
ing research addressing the adoption of IFRS 8 and SFAS 131. Most
IFRS 8 studies investigate the changes in operating segments in-
cluding recent studies addressing analysts’ forecasts (Andre, Filip,
& Moldovan, 2016; He, Evans, & He, 2016) and the usefulness of
segment information (Aleksanyan & Danbolt, 2015; Kajüter & Nien-
haus, 2017). This study analyzes entity-wide geographic disclo-
sures, therefore, the literature review focuses on geographic seg-
ment research.
IFRS 8 geographic disclosure research
Numerous studies investigate the impact of adopting IFRS 8 on
the number of geographic segments disclosed. Crawford, Extance,
Helliar, and Power (2012) report findings of the impact of adopting
IFRS 8 on 150 U.K. companies. Their analysis reveals an increase in
the average number of geographic segments reported with 30% of
the companies increasing the number of geographic segments af-
ter adoption. Nichols, Street, and Cereola (2012) investigate the im-
pact of IFRS 8 on segment reporting by 335 European companies
from 14 countries. They find that the number of companies utiliz-
ing the broad, vague geographic groupings for which IAS 14R was
criticized drops significantly. Kang and Gray (2013) analyze the im-
pact of adopting AASB 8 on 189 companies listed on the Australian
Stock Exchange. Although the study focuses on operating segments,
they note that the geographic disclosures did not change for most
companies. Franzen and Weiβ enberger (2015) find no substantial
changes in segment disclosures of German firms under IFRS 8.
One study (Leung & Verriest, 2015) investigates the changes in
geographic segment disclosures under IFRS 8 by European compa-
nies with greater than 50% foreign sales and whether the changes
had economic and informational consequences. They find that IFRS
8 led to more disaggregated geographic information but a reduced
number of reported items by geographic location. They did not find
a significant impact of adopting IFRS 8 on analyst forecast accu-
racy, forecast dispersion, market liquidity or cost of equity capi-
tal. Leung and Verriest’s (2015) analysis combines the geographic
disclosures of companies reporting geographic operating segments
and companies reporting entity-wide geographic information. This
study differs from Leung and Verriest (2015) by focusing only on
entity-wide geographic disclosures and whether the fineness of
these disclosures improved under IFRS 8. The country of domicile
and material country disclosure requirements apply only to entity-
wide disclosures. Therefore, focusing on the fineness and materi-
ality of only entity-wide disclosures will inform investor concerns
about entity-wide geographic disclosures identified in the PIR of
IFRS 8.
Overall, the IFRS 8 studies indicate that companies are report-
ing more geographic segments and more country specific segments
under the new standard. Although finding an overall increase in
country specific disclosures, many studies raise a concern regard-
ing the continued use of broad geographic regions after the adop-
tion of IFRS 8.
SFAS 131 research
In IFRS 8 s Basis for Conclusions (BC6), the IASB summarizes the
findings of academic research on SFAS 131 in support of its deci-
sion to adopt the SFAS 131 provisions. In addition, several studies
review the literature investigating operating segment disclosures of
US firms under SFAS 131 (see Moehrle et al., 2009; Nichols et al.,
2013) as the Securities and Exchange Commission and the FASB
continue to evaluate potential changes to the standard (Wang &
Ettredge, 2015). Since this study addresses only entity-wide geo-
graphic disclosures, the following literature discussion is limited to
SFAS 131 geographic disclosure research.
Nichols, Street, and Gray (20 0 0) investigate the impact of SFAS
131 on geographic disclosures by 158 US companies. Results show
the number of geographic segments and country specific disclo-
sures increase significantly under SFAS 131. However, many com-
panies with foreign sales representing 30% or more of total sales
failed to report any individual country information other than
country of domicile and 44% of the sample reported a broad geo-
graphic area exceeding 25% of sales. The authors conclude that al-
though SFAS 131 resulted in the more country specific disclosures,
US firms continue to use highly aggregated geographic categories.
Doupnik and Seese (2001) evaluate the materiality level used
to provide country specific information and the fineness of geo-
graphic disclosures after adopting SFAS 131 for 254 Fortune 500
companies with entity-wide geographic disclosures. The material-
ity results show that more than 70% of the sample report infor-
mation for a country generating less than 10% of total revenues.
Doupnik and Sesse’s (2001) fineness results are mixed. Using a
weighting scale based on the fineness of the geographic data (from
0 for “rest of world” to 3 for an individual country), the study finds
 S.J. Cereola et al. / Research in Accounting Regulation 29 (2017) 119–128
no significant increase in the fineness measure. However, when the
weight for individual country data is increased to 4 or 8, the in-
crease in the fineness measure is significant. The authors conclude
that after using an increased weighting scale, there is an improve-
ment in the fineness of the geographic disclosures for a large per-
centage of companies after adopting SFAS 131.
Behn, Nichols, and Street (2002) evaluate the usefulness of SFAS
131 geographic segment disclosures by comparing the predictive
ability of geographic sales disclosures under SFAS 131 and SFAS 14.
Using both perfect foresight and random walk forecasts, they find
a significant improvement in the predictive accuracy of geographic
sales disclosures provided under SFAS 131. Additional analysis finds
that the greatest improvement in predictive accuracy is for compa-
nies reporting country specific information. Their results support
the FASB’s argument that segment information by country is more
informative and useful.
Both IFRS 8 and SFAS 131 dropped one disclosure requirement
from the previous segment standard, SFAS 131 eliminates the dis-
closure of a measure of profitability by geographic area and IFRS
8 eliminates the disclosure of capital additions by geographic area.
A number of SFAS 131 studies analyze the impact of eliminating
the geographic earnings disclosure. These studies investigate the
impact on investors and analysts ability to predict earnings (Hope
& Thomas, 2008; Hope, Thomas, & Winterbotham, 2006), the im-
pact on investors’ pricing of foreign earnings for those companies
that continue to disclose foreign earnings (Hope, Kang, Thomas,
& Vasvari, 20 08,20 09) and the impact on information asymmetry
(Hope et al., 2006). Since IAS 14R did not require an earnings dis-
closure, a detailed discussion of these studies is not included.
Investor feedback obtained during the PIR questions whether
the geographical information provided under IFRS 8 distinguishes
between different regions in way that is useful for investors
(IASB, 2013). Previous research investigating the change in geo-
graphic segment disclosures under IFRS 8 finds an increase in the
number of segments disclosed but raises concerns about the con-
tinued use of broad geographic categories. This study extends the
prior research by evaluating the change in the level of geographic
aggregation (fineness) with the adoption of IFRS 8.
Sample selection and research methodology
This research analyzes the change in entity-wide geographic
segment reporting under IFRS 8 for companies comprising the top
tier index of 20 European stock exchanges (Austria, Belgium, Czech
Republic, Denmark, Finland, France, Germany, Greece, Hungary, Ire-
land, Italy, Luxembourg, the Netherlands, Norway, Poland, Portugal,
Spain, Sweden, Switzerland, United Kingdom) and the top tier in-
dex in Australia and New Zealand. The study examines information
obtained from the annual reports for the year of adoption and the
year preceding adoption.2
Table 1 shows the determination of the final sample. The cross-
listed companies are assigned to the index associated with their
country of domicile and excluded from the index where they are
cross-listed. Financial companies, utilities and insurance compa-
nies are excluded due to their unique industry attributes.3 Of
the 478 remaining companies, the 100 companies reporting geo-
graphic segments as their operating segments and not providing
2
IFRS 8 became mandatory for financial years commencing January 1, 2009 and
later. Thus, companies with year-ends other than December 31 were first required
to follow IFRS 8 during 2010. For companies that early adopted, the analysis in-
cludes data from the year of adoption and the year preceding adoption.
3 communication companies (7%), 20 transportation companies (6%), 17 wholesale
Nichols, Bishop, & Street (2002) analyzed the impact of SFAS 131 on the bank-
ing industry. The study found that SFAS 131 had a minimal impact on geographic
segment reporting in the banking industry. We analyzed the geographic reporting
of the 70 banks excluded from our sample and found no significant results in the
banking industry, similar to the SFAS 131 results of Nichols et al. (2002).
121
any entity-wide geographic disclosures under IFRS 8 and the 25
additional companies that do not disclose any geographic informa-
tion are excluded from the sample. Thus, the final sample includes
353 companies (306 European companies and 47 Australian and
New Zealand companies).4
Materiality threshold
IFRS 8 requires that companies disclose revenues from exter-
nal customers attributed to (1) the country of domicile and (2) all
other countries in total. It also requires separate disclosure of rev-
enues attributed to an individual foreign country if those revenues
are material. IFRS 8 does not define materiality for purposes of
individual country disclosures, leaving this determination to man-
agement. Unless management discloses the materiality level, one
cannot know with certainty a company’s materiality threshold for
determining when to disclose individual foreign country revenues.
However, by evaluating the actual individual country disclosures,
the study can determine an upper bound on the company’s mate-
riality threshold.5
The study assumes that management determines the materi-
ality of individual country revenues by comparing country spe-
cific revenues to total revenues. If the individual country’s percent-
age of total revenues exceeds the company’s materiality thresh-
old, then the individual country’s revenue would be separately dis-
closed. This study determines the upper bound on the company’s
materiality threshold by determining the percentage of total rev-
enue for each individually disclosed country and identifying the
country with the smallest percentage of total revenues (other than
the country of domicile). The percentage for the “smallest coun-
try” provides evidence of management’s upper bound for a country
to be considered material. For example, in 2009 Ericsson discloses
revenue for four countries including Sweden, the country of domi-
cile. The percentage of total revenues ranges from 7% to 10% for
the non-domicile countries. The study infers that Ericsson’s man-
agement uses a materiality threshold of no greater than 7% of total
revenues. It is not possible to determine if management’s actual
materiality threshold is less than 7%. For example, management’s
materiality cutoff may actually be 5%, but the country with the
smallest percentage over 5% had revenues equal to 7% of total rev-
enues.
The addition of the country of domicile disclosure under IFRS
8 is also of interest. Given the global reach of many large Euro-
pean and AU/NZ companies, the country of domicile revenues may
be smaller than revenues in some of the individual countries dis-
closed. Therefore, the study compares the percentage of total rev-
enue for the country of domicile to the individually material coun-
try disclosures.
Fineness measures
The study uses three measures to evaluate the impact of IFRS 8
on the fineness of geographic disclosures. Similar to prior studies,
the first measure counts the number of geographic segments pro-
vided under IAS 14R and IFRS 8. The second measure averages the
segments’ aggregation levels under each standard. The third mea-
sure weights the segments’ aggregation levels by the percentage of
total revenues reported in the segment under each standard. The
4
The final sample consists of 180 manufacturing companies (51%), 40 mining
companies (11%), 29 service companies (8%), 23 construction companies (7%), 25
trade companies (5%), 11 retail trade companies (3%), and 8 agricultural companies
(2%).
5
The materiality level/threshold in the study refers to the materiality
level/threshold the company uses for public disclosures.
122 S.J. Cereola et al. / Research in Accounting Regulation 29 (2017) 119–128

Table 1
Sample selection process by country (index).

By country Top – tier national Companies Annual Cross- Financial, Remaining Geographic No Final
index comprising report not Listed, US utilities & Companies primary geographic sample
index in English GAAP, other insurance segments∗ segments∗∗

Austria ATX 20 8 12 2 10
Belgium BEL 20 20 1 8 11 4 7
Czech PX 13 2 3 8 3 5
Denmark OMXC 20 19 4 15 2 13
Finland OMXH 25 24 1 3 20 2 18
France CAC 40 + Next 20 60 3 13 44 7 4 33
Germany DAX 30 + MDAX 50 80 2 14 64 11 1 52
Greece Athex 20 20 10 10 2 3 5
Hungary BUX 12 2 3 7 3 2 2
Ireland ISEQ 20 20 4 16 2 14
Italy MIB 30 40 1 15 24 6 1 17
Luxembourg LUXX 12 4 2 3 3 1 2
Netherlands AEX 25 2 1 4 18 3 15
Norway OBX 25 3 3 19 7 2 10
Poland WIG 20 20 10 10 3 2 5
Portugal PSI 20 5 15 3 3 9
Spain IBEX 35 35 1 2 15 17 1 1 15
Sweden OMSX 30 30 2 5 23 3 1 19
Switzerland SMI 20 4 5 11 2 1 8
United Kingdom FTSE 100 101 1 31 69 18 4 47
Europe Subtotal 616 9 25 166 416 85 25 306
Australia ASX 50 48 2 18 28 3 25
New Zealand NZX 50 48 1 13 34 12 22
Total 712 9 28 197 478 100 25 353
∗
These companies report geographic segments as their operating segments and do not provide any entity-wide geographic disclosures under IFRS 8. They are excluded
from the sample.
∗∗
These companies do not disclose any geographic information and are excluded from the sample.

analysis tests the significance of the change in the resulting mea-
sures under IAS 14R and IFRS 8 for each of the three approaches.
The second measure averages the number of segments reported
weighted by the level of aggregation represented by the segment.
The resulting “average” fineness score (Average F) is then com-
pared under IAS 14R and IFRS 8. The Average F score is calculated
as follows:

n
Average F = Segment W EIGHT /n
i=1
Where WEIGHT = 0, for geographic segments described as
“Other” or “Rest of World”
1, for geographic segments including
multiple continents
2, for geographic segments representing a
single
continent or subset of a single country such
as “European Union” or “Rest of Europe”
3, for geographic segments representing a
single country
The third measure combines the number of segments reported
and the level of aggregation represented by the segment, weighted
by the percentage of revenues in the segment. The resulting
“weighted” fineness score (Weighted F) is then compared under
IAS 14R and IFRS 8. The Weighted F is calculated as follows:
n   age F is 1.5.
 SE GREVi
W eighted F = x W EIGH Ti
T OT ALREV
i=1
Where SEGREV = revenue for geographic segment i
TOTALREV = total revenue
WEIGHT = 0, for geographic segments described as
“Other” or “Rest of World”
1, for geographic segments including
multiple continents
2, for geographic segments representing a
single continent or subset of a single
country such as “European Union” or “Rest
of Europe”
3, for geographic segments representing a
single country
The larger the F score, the finer the geographic segment infor-
mation provided by the company.
The weights are consistent with the weighting system used by
Doupnik and Seese (2001). The zero weight for “other” or “rest of
world” indicates that these disclosures, used by most companies,
provide no useful geographic risk information. The weights of 1, 2
and 3 indicate increasingly useful geographic risk assessment in-
formation with 3 being the most useful information at the coun-
try specific level.6 The Average F reflects the portion of total rev-
enues disclosed by level of geographic aggregation. The greater the
Average F, the more detailed the geographic information provided
by the company. For example, Mobistar provides revenues for two
countries, Belgium and Luxembourg. Since each of Mobistar’s ge-
ographic segments represents a single country, Mobistar’s Average
F is 3.0. In contrast, Belgacom also discloses revenue for two geo-
graphic segments, Domestic (Belgium) and Other. Belgacom’s Aver-
6
Doupnik and Seese (2001) used alternate weighting schemes, weighting country
specific disclosures as 3, 4, and 8. The mean change in the fineness score from 1997
to 1998 was not significant when the country specific weight was 3. However, the
mean change was significant using the country specific weight of 4 or 8.
 S.J. Cereola et al. / Research in Accounting Regulation 29 (2017) 119–128 123

Table 2
Aggregation level of entity-wide geographic revenue disclosures under IAS 14R and IFRS 8.

IAS 14R IFRS 8

Level of aggregation Level of aggregation

By country Countries Mixed Domestic Domestic Regions None Total Countries Mixed Domestic Domestic Regions None Total
regions other regions other

Austria 2 2 3 0 2 1 10 3 3 2 0 2 0 10
Belgium 2 1 0 1 3 0 7 3 2 1 1 0 0 7
Czech 2 1 2 0 0 0 5 2 1 2 0 0 0 5
Denmark 1 1 3 0 7 1 13 4 1 4 1 3 0 13
Finland 2 5 8 0 3 0 18 1 7 9 0 1 0 18
France 2 9 12 0 10 0 33 3 11 15 0 4 0 33
Germany 2 11 27 0 10 2 52 3 19 25 2 3 0 52
Greece 2 0 2 0 0 1 5 3 0 2 0 0 0 5
Hungary 1 1 0 0 0 0 2 1 1 0 0 0 0 2
Ireland 5 4 0 3 2 0 14 7 5 2 0 0 0 14
Italy 1 2 9 0 4 1 17 2 3 8 2 2 0 17
Luxembourg 1 1 0 0 0 0 2 1 1 0 0 0 0 2
Netherlands 3 6 2 0 4 0 15 4 6 3 0 2 0 15
Norway 2 5 1 0 1 1 10 2 4 2 0 2 0 10
Poland 1 1 0 1 0 2 5 1 1 0 3 0 0 5
Portugal 3 2 1 1 2 0 9 2 3 1 1 2 0 9
Spain 1 4 7 1 2 0 15 2 4 7 1 1 0 15
Sweden 1 4 5 0 8 1 19 6 6 3 1 2 1 19
Switzerland 2 2 1 0 3 0 8 2 4 1 0 1 0 8
United Kingdom 2 17 11 1 12 4 47 12 22 6 3 4 0 47
European subtotal 38 79 94 8 73 14 306 64 104 93 15 29 1 306
12% 26% 30% 3% 24% 5% 21% 34% 30% 5% 10% 0%
Australia 1 8 3 2 10 1 25 8 6 4 3 3 1 25
New Zealand 9 8 1 0 2 2 22 12 7 1 0 2 0 22
AU/NZ subtotal 10 16 4 2 12 3 47 20 13 5 3 5 1 47
21% 34% 9% 4% 26% 6% 42% 28% 11% 6% 11% 2%
Total 48 95 98 10 85 17 353 84 117 98 18 34 2 353
13% 27% 28% 3% 24% 5% 24% 33% 28% 5% 10% 0%

Countries: country specific disclosures including at least one country other than the country of domicile
Mixed: mix of countries and regions with country specific disclosures for at least one country other than the country of domicile
Domestic/Regions: country of domicile and regions
Domestic/Other: country of domicile and other
Regions: continent (including portions of a continent such as Western Europe) and multicontinent segments with no country disclosures

The Weighted F incorporates the percentage of total revenues
disclosed at each level of geographic aggregation. This is accom-
plished by adjusting the geographic area weights by the ratio of
segment revenues to total revenues. With the weighted measure,
the fineness score increases as the percentage of total revenues
disclosed by less aggregated geographic areas increases. Scores can
range from just above zero (two segments, one segment and other,
with the majority of revenues classified as other) to 3.0 (all rev-
enues allocated to specific countries). For example, in 2009 Colo-
plast reports revenues for Denmark and other, with Denmark rep-
resenting 2.5% of total revenues. Colorplast’s Weighted F is 0.075
((2.5%∗ 3) + (97.5%∗ 0)).
Results
Level of geographic segment aggregation
Table 2 provides the breakdown of the level of aggregation pro-
vided by the sample companies under IAS 14R and IFRS 8. Of
the 353 sample companies, 18 (5%) disclose revenues for only the
country of domicile (domestic/other) with no additional disaggre-
gation under IFRS 8. Of the 18 companies reporting domestic/other
under IFRS 8, the average percentage revenues for the country of
domicile is 71% (ranging from 3% to 99%) with six companies re-
porting more than 90% of their revenues in the country of domi-
cile. Using a 10% materiality threshold, these six companies could
not have another material country to disclose. However, four com-
panies report less than 50% of their revenues in the country of
domicile, with Coloplast reporting 97% of their revenues outside
the country of domicile. Thirty-four companies (10%) report rev-
enues only by regions (no country of domicile or individual coun-
try information), a significant decrease from 85 companies (24%)
under IAS 14R (t = 5.23, p < 0.01).
The number of companies reporting country specific segments
increases significantly from 48 (13%) under IAS 14R to 84 (24%)
under IFRS 8 (t = 3.51, p < 0.01) and the number of companies
reporting a mix of countries and regions increases significantly
from 95 (27%) under IAS 14R to 117 (33%) under IFRS 8 (t = 1.80,
p = 0.04). On average, companies reporting country specific infor-
mation provide revenues for 4.86 countries, including the country
of domicile. Of the 84 companies reporting country specific infor-
mation, 35 (42%) provide information for only one country other
than the country of domicile and 17 companies (20%) provide rev-
enues for more than five additional countries (other than the coun-
try of domicile). The difference between the percentage of Euro-
pean (21%, 64 companies) and AU/NZ (42%, 20 companies) compa-
nies reporting by country is significant (t = 2.84, p < 0.01).
The 117 companies reporting a mix of countries and regions un-
der IFRS 8 report an average of 7.37 segments, with an average of
2.9 countries, excluding the country of domicile. Forty-five com-
panies (38%) provide information for only one country other than
the country of domicile and 20 companies (17%) provide revenues
for more than five additional countries. The increase in compa-
nies reporting country specific and mixed segments indicates that
the IFRS 8 requirement to disclosure material country revenues re-
sulted in a significant number of companies reporting disaggre-
gated revenues at the individual country level.
124 S.J. Cereola et al. / Research in Accounting Regulation 29 (2017) 119–128

Table 3
Companies disclosing at least one individual country’s revenues other than country of domicile under IFRS 8 percentage of total revenues
represented by smallest individual country reported.

IAS 14R IFRS 8

By country <5% 5–10% >10% Total <5% 5–10% >10% Total

Austria 0 1 3 4 1 1 4 6
Belgium 1 1 1 3 2 1 2 5
Czech 1 1 1 3 1 0 2 3
Denmark 0 0 2 2 3 0 2 5
Finland 5 0 2 7 3 1 4 8
France 4 2 5 11 4 3 7 14
Germany 8 0 4 12 7 4 8 19
Greece 1 0 1 2 2 0 1 3
Hungary 0 2 0 2 0 0 2 2
Ireland 3 0 7 10 0 4 8 12
Italy 1 0 2 3 2 0 3 5
Luxembourg 1 0 1 2 1 1 0 2
Netherlands 5 1 3 9 7 1 2 10
Norway 5 0 2 7 3 2 2 7
Poland 2 0 0 2 2 0 0 2
Portugal 4 0 1 5 3 0 2 5
Spain 3 0 2 5 4 0 2 6
Sweden 2 1 3 6 6 3 4 13
Switzerland 1 2 1 4 2 1 3 6
United Kingdom 4 4 11 19 12 10 13 35
European subtotal 51 15 52 118 65 32 71 168
43% 13% 44% 39% 19% 42%
Australia 1 3 6 10 5 2 8 15
New Zealand 1 2 14 17 4 3 11 18
AU/NZ subtotal 2 5 20 27 9 5 19 33
7% 19% 74% 27% 15% 58%
Total 53 20 74 147 74 37 90 201∗
36% 14% 50% 37% 18% 45%
∗
t-test, increase in number of companies providing individual country sales (other than country of domicile), significant at p < 0.0 0 01
(t = 4.11); Mann Whiney U test significant at p = 0.0 0 02 (z = 3.57)

IFRS 8 requires only country of domicile and material country
segment disclosures. Ninety-eight companies (28%) provide geo-
graphic segment revenues at either the continent or multiconti-
nent level in addition to country of domicile revenues (see Table 2,
Domestic/Regions column). Since it is assumed that these compa-
nies do not have material revenues for individual countries, they
are voluntarily providing disclosures that are not required under
IFRS 8.
Individual country and country of domicile materiality thresholds
By evaluating the individual country disclosures (other than
country of domicile), the study can determine an upper bound
on the company’s materiality threshold. Table 3 provides summary
information for the 201 companies providing country specific dis-
closures (84 companies) or mixed country and region disclosures
(117 companies) under IFRS 8. The study classifies the disclosures
into three groups based on the percentage of total revenues for
the “smallest” country (not including the country of domicile). The
three groups are (1) less than 5% of total revenues, (2) between 5%
and 10% of total revenues, and (3) greater than 10% of total rev-
enues.
Table 3 shows that after the adoption of IFRS 8, 74 (37% of 201)
companies disclose individual country revenues representing less
than 5% of total revenues with 40 companies disclosing revenues
for at least one country equal to less than 2% of total revenues.
This indicates that these companies use a materiality level of less
than 5%. Thirty-seven (37) companies (18%) disclose revenues for
the smallest country between 5% and 10% of total revenues indi-
cating either a materiality level between 5% and 10% or the com-
pany did not have an individual country with revenues less than
this range. The remaining 90 companies (45%) report revenues for
the smallest country at greater than 10% of total revenues.
Fifty-five (55) percent of the European companies (168 out of
306) and 70% of the AU/NZ companies (33 out of 47) report rev-
enues for at least one country other than the country of domi-
cile under IFRS 8. The percentage of AU/NZ companies reporting
revenues for a non-domicile country is significantly greater than
the European percentage (t = 2.09, p = 0.04). Australian companies
identify the United States most frequently (9 of 15 companies) and
every New Zealand company separately discloses revenues for Aus-
tralia (18 out of 18). For European companies, the United States is
the most frequently disclosed country (84), followed by the United
Kingdom (46), Germany (41), France (36), and China (29).
Table 4 provides additional information for each materiality
threshold group from Table 3. The results show that the percent-
age of total revenues disclosed by individual country under IFRS 8
is similar across all three threshold groups ranging from 36.7% to
38.3%. A larger percentage of companies in the two lower threshold
groups report revenues for more than one country (84% each) than
the companies in the greater than 10% threshold group (24%). Fur-
ther evaluation of the relationship between the materiality thresh-
old and the number of countries reported finds a negative corre-
lation of –0.4176 (p < 0.001) between the percentage of revenues
in the smallest country and the number of countries reported. This
provides evidence that as management’s materiality threshold in-
creases, the number of material countries reported decreases.
The materiality results are similar to Doupnik and
Seese’s (2001) materiality results for the adoption of SFAS
131. Both studies find that more than half of the companies
disclosing individual countries report an individual country with
revenues less than the 10% threshold and the average number
of individual countries disclosed is greater for the two lower
threshold groups. The similarity in findings suggests that for some
companies, management believes there are benefits associated
with disclosing individual country information including signaling
 S.J. Cereola et al. / Research in Accounting Regulation 29 (2017) 119–128 125

Table 4
Companies disclosing at least one individual country’s revenues other than country of domicile under IFRS 8 number of companies, average number of individual countries
disclosed (other than country of domicile), percentage of total revenues by individual country and number of countries reported, by materiality threshold.

Materiality threshold Number of countries reported

% of Revenues in Number of Average number of % of Total revenues by 1 >1

smallest country companies countries disclosed individual country

<5% 74 4.8 38.3% 12 62 (84%)

5% to 10% 37 2.7 36.7% 6 31 (84%)
>10% 90 1.3 37.1% 68 22 (24%)
Total 201 2.8 38.2% 86 115 (57%)

Table 5
Comparison of percentage of total revenues represented by country of domicile under IAS 14R and IFRS 8 Companies disclosing revenues
by country of domicile.

IAS 14R IFRS 8

By country <5% 5–10% >10% Total <5% 5–10% >10% Total

Austria 1 1 5 7 3 0 5 8
Belgium 0 0 3 3 2 0 5 7
Czech 0 0 4 4 0 0 4 4
Denmark 3 0 1 4 6 1 2 9
Finland 0 4 11 15 2 5 9 16
France 1 1 19 21 2 2 24 28
Germany 1 0 39 40 1 2 46 49
Greece 0 0 4 4 0 0 5 5
Hungary 0 0 2 2 0 0 2 2
Ireland 0 2 8 10 2 2 9 13
Italy 0 0 12 12 0 0 14 14
Luxembourg 0 0 0 0 0 0 0 0
Netherlands 2 2 5 9 3 2 6 11
Norway 1 1 6 8 1 2 5 8
Poland 0 0 3 3 0 0 5 5
Portugal 0 0 7 7 0 0 6 6
Spain 0 0 12 12 0 0 13 13
Sweden 5 0 4 9 7 1 6 14
Switzerland 3 0 2 5 3 0 4 7
United Kingdom 2 4 16 22 6 7 22 35
European subtotal 19 15 163 197 38 24 192 254
10% 8% 82% 15% 9% 76%
Australia 0 0 11 11 1 0 16 17
New Zealand 0 0 17 17 1 1 18 20
AU/NZ subtotal 0 0 28 28 2 1 34 37
0% 0% 100% 5% 3% 92%
Total 19 15 191 225 40 25 226 291∗
8% 7% 85% 14% 8% 78%
∗
t-test, increase in number of companies providing country of domicile sales significant at p < 0.0 0 01 (t = 5.72); Mann Whiney U test
significant at p = <.0 0 01 (z = 4.30)

international diversification and/or signaling low international
risk (Cai & Warnock, 2012; Doupnik & Seese, 2001, Hope, Kang,
Thomas, & Vasvari, 2009).
Table 5 shows that the number of companies disclosing coun-
try of domicile revenues increases significantly from 225 under IAS
14R to 291 under IFRS 8 (t = 5.72, p < 0.001), reflecting the IFRS 8
requirement to disclose country of domicile. The country of domi-
cile revenue percentage ranges from 0.16% to 99.05% with a mean
of 33.11% and a median of 24.69%. Eighty-three (83) percent of the
European companies (254 out of 306) and 79% of the AU/NZ com-
panies (37 out of 47) disclose revenues for the country of domicile.
The difference between the two groups is not significant. Addi-
tional analysis finds that an average of 30.9% of European company
revenues and an average of 48.2% of AU/NZ company revenues are
generated in the country of domicile. This difference is significant
(t = 3.11, p < 0.01).
Fineness measures
To evaluate the impact of IFRS 8 on the fineness of geographic
data disclosures, the study computes two fineness scores, the Aver-
age F and the Weighted F. Table 6 summarizes the fineness scores
for all 353 companies. The first two columns include the average
number of geographic segments reported under IAS 14R and IFRS
8. The average increases significantly from 4.93 to 5.42 segments
(t = 2.07, p = 0.02). Of the 353 companies, 206 companies (58%) re-
port the same number of geographic segments under IFRS 8 and
IAS14R; 114 companies (32%) report a greater number of segments;
and 33 companies (10%) report fewer segments under IFRS 8 than
under IAS 14R.
The Average F equals the average of the total segment aggre-
gation weights. The increase in the Average F score for all compa-
nies from 1.82 under IAS 14R to 1.99 under IFRS 8 is significant
(t = 3.99, p < 0.001). The Weighted F equals the sum of the seg-
ment’s level of aggregation weighted by the percentage of revenues
in the segment. The increase in the Weighted F score for all com-
panies from 2.03 under IAS 14R to 2.15 under IFRS 8 is significant
(t = 2.51, p = 0.005). The significant increase in both the Average F
and the Weighted F for the entire sample indicates that the adop-
tion of IFRS 8 improved the fineness of company’s geographic dis-
closures.
A separate analysis of the European companies finds a signif-
icant increase in the average number of segments, the Average
F, and the Weighted F after adopting IFRS 8 (t = 1.95, p = 0.03;
126 S.J. Cereola et al. / Research in Accounting Regulation 29 (2017) 119–128

Table 6
Comparison of number of geographic segments reported and fineness scores under IAS 14R and IFRS 8 companies with entity-wide geographic disclosures by country.

Panel A: Comparison by country

By country Average number of Average number of Average fineness Average fineness Weighted fineness Weighted fineness Number of
segments IAS 14R segments IFRS 8 score IAS 14R score IFRS 8 score IAS 14R score IFRS 8 companies

Austria 4.60 5.60 1.69 1.99 1.89 2.13 10

Belgium 3.43 5.29 1.85 2.22 2.24 2.32 7
Czech 3.40 3.40 2.23 2.02 2.63 2.42 5
Denmark 3.77 4.46 1.49 1.85 1.68 1.57 13
Finland 6.89 6.56 1.86 1.88 2.21 2.10 18
France 5.30 5.48 1.72 1.84 1.91 1.98 33
Germany 5.04 5.06 1.75 1.86 1.95 2.04 52
Greece 3.40 4.20 1.75 2.11 1.82 2.16 5
Hungary 4.00 3.50 2.40 2.13 2.40 2.38 2
Ireland 3.14 4.00 2.08 2.17 2.29 2.24 14
Italy 5.06 5.35 1.61 1.68 1.86 2.01 17
Luxembourg 11.50 11.50 2.56 2.59 2.54 2.53 2
Netherlands 5.73 6.40 1.92 2.03 2.04 2.19 15
Norway 8.10 7.80 1.93 2.01 1.99 2.24 10
Poland 4.20 4.80 1.36 1.76 1.47 2.58 5
Portugal 6.67 5.89 2.09 2.00 2.34 2.32 9
Spain 5.20 5.40 1.88 1.92 2.35 2.28 15
Sweden 5.05 6.79 1.69 1.93 1.78 1.77 19
Switzerland 6.00 6.75 1.89 2.12 1.95 2.15 8
United 4.53 5.55 1.61 2.04 1.84 2.17 47
Kingdom
European 5.20 5.72 1.77 1.95 1.98 2.10 306
subtotal
Australia 3.12 3.40 2.04 2.09 2.24 2.39 25
New Zealand 3.23 4.09 2.25 2.44 2.49 2.69 22
AU/NZ subtotal 3.17 3.72 2.14 2.26 2.36 2.53 47
Total 4.93 5.42 1.82 1.99 2.03 2.15 353

Panel B: Tests for significance of increases in segments and fineness scores

(significance determined using one-tailed test) European subtotal AU/NZ subtotal Total
t-test for overall increase in average number of segments (Mann Whiney U test t = 1.95 t = 1.58 t = 2.07
for Total significant at p = 0.002 (z = 3.11)
p = 0.03 p = 0.06 p = 0.02
t-test for overall increase in average fineness score (Mann Whiney U test for t = 4.26 t = 0.84 t = 3.99
Total significant at p = 0.001 (z = 3.72)
p < 0.001 p > 0.10 p < 0.001
t-test for overall increase in weighted fineness score (Mann Whiney U test for t = 2.39 t = 1.28 t = 2.51
Total significant at p = 0.02 (z = 1.98)
p = 0.01 p = 0.10 p = 0.005

t = 4.26, p < 0.001; t = 2.39, p = 0.01, respectively). These results are
consistent with the results for the entire sample. A separate anal-
ysis of the AU/NZ companies indicates a significant increase in the
average number of segments and the Weighted F (t = 1.58, p = 0.06;
t = 1.28, p = 0.10, respectively) but the increase in the Average F is
not significant. This result suggests that although the change in the
composition of the segments is not significant, the percentage of
revenues represented by less aggregated categories (countries and
single continent) increased.
Additional analysis of the European and AU/NZ companies finds
a significant difference between the two regions for all three mea-
sures under IFRS 8. The difference in the average segments (5.72
for Europe and 3.72 for AU/NZ) is significant at p < 0.001 (t = 6.12).
The difference in the Average F (1.95 for Europe and 2.26 for
AU/NZ) and Weighted F (2.10 for Europe and 2.53 for AU/NZ) are
both significant at p < 0.01 (t = 3.20 and t = 4.84, respectively).
These results suggest that although the European companies re-
port more segments, the AU/NZ disclosures are at a greater level
of disaggregation than the European companies. This is consistent
with the significant difference between the percentage of AU/NZ
(70%) and European (55%) companies reporting individual country
information (Table 3).
This study uses Doupnik and Seese’s (2001) methodology for
the Average F score. Their study of the effect of adopting SFAS 131
on the fineness of geographic information finds no significant in-
crease in the F score using the country specific weight of 3. How-
ever, they find a significant increase in the F score using a weight
of 4 or 8 for country specific information. They conclude that the
improvement in geographical fineness after adopting SFAS 131 de-
pends upon the weight assigned to country level disclosures. In
contrast, this study finds a significant increase in the Average and
Weighted F with the adoption of IFRS 8 using the country specific
weight of 3 (Table 6) suggesting a greater improvement in fineness
from the adoption of IFRS 8 by European and AU/NZ companies
than the adoption of SFAS 131 by US companies.7
Analysis by level of aggregation
For additional analysis, companies are divided into five groups
based on the geographic segment aggregation level used under
IFRS 8:
1. Companies providing disclosure by individual country, in addi-
tion to country of domicile (n = 84)
2. Companies providing a mix of country and continent or multi-
continent disclosures (n = 117)
7
Testing the sensitivity of this study’s findings by increasing the weight of county
level data to 4 and 8 finds significant increases at p<0.001 for the Average F and
Weighted F using both alternative weights. Since the results using the original
weight of 3 are significant, the results using the alternative weights are not re-
ported.
 S.J. Cereola et al. / Research in Accounting Regulation 29 (2017) 119–128 127

Table 7
Comparison of number of geographic segments reported and fineness scores under IAS 14R and IFRS 8 Companies with entity-wide geographic disclosures By type of
disclosure.

By type of disclosure Average Average Average Average Weighted Weighted Number of

number of number of Fineness Score Fineness Score Fineness Score Fineness companies
segments IAS segments IFRS IAS 14R IFRS 8 IAS 14R Score IFRS
14R 8 8

All companies 4.93 5.42∗∗ 1.82 1.99∗∗∗ 2.03 2.15∗∗∗ 353

Increase 114 123 179
Decrease 33 53 161
No change 206 177 13
Disclosure by country 4.18 4.86∗∗ 2.07 2.44∗∗∗ 2.15 2.36∗∗ 84
Increase 30 40 40
Decrease 13 14 35
No change 41 30 9
Disclosure by mix of countries/regions 6.41 7.37∗∗ 2.00 2.17∗∗∗ 2.20 2.32∗∗ 117
Increase 51 51 77
Decrease 8 13 40
No change 58 53 0
Disclosure by domestic/regions 4.65 4.88# 1.66 1.72# 1.95 2.00# 98
Increase 22 20 40
Decrease 4 15 57
No change 72 63 1
Disclosure by domestic/other 2.06 2.00 1.02 1.50 1.37 2.12 18
Increase 7 8 9
Decrease 4 4 9
No change 7 6 0
Disclosure by regions 3.97 4.00 1.44 1.45 1.72 1.73 34
Increase 3 4 13
Decrease 2 5 18
No change 29 25 3
None 5.00 1.00 1.74 0.00 2.25 0.00 2
Decrease 2 2 2
∗
difference between IAS 14R and IFRS 8 significant at p < 0.10
Mann-Whitney U test results (not reported) are similar to the t-test results.
∗∗∗
difference between IAS 14R and IFRS 8 significant at p < 0.01
∗∗
difference between IAS 14R and IFRS 8 significant at p < 0.05
#
difference between IAS 14R and IFRS 8 not significant at p < 0.10

3. Companies providing disclosure by country of domicile and re-
gions (n = 98)
4. Companies providing disclosure by country of domicile and
other (n = 18)
5. Companies providing disclosure by regions, not disclosing coun-
try of domicile (n = 34)
Table 7 includes the average number of segments disclosed, the
Average F scores, and the Weighted F scores for these five groups.
Table 7 shows significant increases in all three measures (aver-
age number of segments, Average F and Weighted F) for compa-
nies disclosing individual country information and companies dis-
closing a mix of countries and regions. This result indicates that
these companies report a greater percentage of total revenues in
less aggregated segments after the adoption of IFRS 8, significantly
improving the fineness of the geographic disclosures. Doupnik and
Seese (2001) also find significant increases in the average number
of segments and the F score for companies disclosing individual
countries and a mix of countries and regions. The consistency of
findings for these two subsets of companies suggests that the re-
quirement to provide country of domicile and other material coun-
try disclosures under both SFAS 131 and IFRS 8 resulted in a finer
set of geographic disclosures than provided under the prior stan-
dard.
Summary and conclusions
This research study investigates the change in the reporting of
entity-wide geographic segments with the adoption of IFRS 8 by
European and AU/NZ blue chip companies. The study focuses on
the change in the fineness of the geographic segments disclosed
and the materiality of the individual country and country of domi-
cile disclosures. The analysis finds a significant decrease in the
number of companies reporting only broad geographic regions and
a significant increase in the number of companies reporting coun-
try specific segments and a mix of countries and regions after the
adoption of IFRS 8. The increase in companies reporting country
specific and mixed segments indicates that the requirement to dis-
close country of domicile and material country data under IFRS 8
resulted in a significant number of companies reporting disaggre-
gated revenues at the individual country level. To the extent coun-
try specific information is more useful, financial analysts and the
IASB should welcome this result.
The significant increase in all three fineness measures (average
number of segments, Average F and Weighted F) also indicates an
improvement in the level of disaggregation of geographic informa-
tion disclosed under IFRS 8. When the fineness measures are ana-
lyzed by disclosure type (countries, mixed, etc.), the results show
significant increases in all three measures for disclosure by country
and mixed segments. Overall, the evidence finds an improvement
in the fineness of the geographic information disclosed after the
adoption of IFRS 8 that should be useful to investors analyzing in-
ternational risk.
The analysis finds that 55% of the companies disclosing individ-
ual country revenues for a least one country other than the coun-
try of domicile report revenues of less than 10% of total revenues
suggesting that management uses a materiality threshold of less
than 10% for determining a material country. The study also finds
that the lower the materiality threshold, the greater the number of
individual countries disclosed suggesting that in some cases man-
agement believes the company benefits from disclosing country
specific data at lower threshold levels. However, only 57% (201 out
128 S.J. Cereola et al. / Research in Accounting Regulation 29 (2017) 119–128
of 353) of the sample disclose country information other than the
country of domicile. These mixed results imply that management
may be interpreting the vague wording of “material” to either dis-
close or conceal information about specific countries, depending on
management’s view of the benefit or detriment to the company.
Without clear guidance for identifying material countries, investors
desire for information that distinguishes between different regions
in a way that is useful may not be met (IASB, 2013). Therefore,
the IASB should consider either requiring management to disclo-
sure the level of materiality used to determine material countries
or prescribing a specific level of materiality that must be used (see
ESMA, 2011 and Franzen & Weiβ enberger, 2015). IFRS 8 provides
a broad exemption from entity-wide geographic disclosures when
“the necessary information is not available and the cost to develop
it would be excessive” (IASB 2006, para. 33). The IASB should also
consider requiring companies that use this exemption to disclosure
that information.
This study focuses on the changes in entity-wide geographic
segment disclosures with the adoption of IFRS 8. Building on the
work of Leung and Verriest (2015), future research should inves-
tigate whether the change in fineness of the geographic informa-
tion results in a change in the usefulness of such disclosures. This
research investigates changes in the year of adoption. As compa-
nies adjust to comply with the new standard, their disclosures may
change over time. Therefore, future research should include longi-
tudinal studies extending beyond the year of adoption to evalu-
ate the sustained disclosure of country specific data and whether
it meets investor needs. This research sample includes the largest
European and AU/NZ companies that are subject to substantial reg-
ulatory oversight and audited by the largest international account-
ing firms. This limits the generalizability of the results. Accordingly,
future research should expand the analysis to smaller companies
from the sample countries and companies using IFRS in other re-
gions of the world.
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