Si TERS 8: Operatin HAPTER- TERS OPERATING SEGMENTS LOI: SEGMENT REPORTING Sexment epring i required for any ety whose deb or equity is quoted on publi sexes rg (stock market) and also entities that are inthe process of becoming quoted. 1.1 Operating Sepment ‘Thisisa component tht meets al the following thre erteria: 1. Itengages in business acvities fom which may enrm revenues and incur expenses interegroen revenues from transitions wih oer components ofthe same entity (A sar-ip operation not et caing revenues ay be anoying segrent. 2. operating resus ae regularly reviewed by the entiys "chit operating decane make decisions (about resources tobe allocate) and to asses it perfomane. (it eating dvison-nar maybe CEO or tou of dzeaars 3. Disoret financial information is avabe (Seat ecouning econ ae Kap) ‘Note: Corporate hesdguares roth departs en evens (rol cette) are not operating segments 2 ation ‘Two or more operating segunels amy be agerege ne operating segment if the segmens bae similar economic characteristics andthe segments sce simile in each ofthe following respec ~ the nature of products and services (eg. domestic o industrial), = = the nature of the production process (e.g. maturing or production line), ~ types or class of customer (eg. corporate o individual); = distribution method (e.g. door-to-door ot Web sales); and + the regulatory environment (.g. in shipping, banking, etc). 1 i uch Quanta Separate information must be reported for an operating segment that mects any one of the {oon uantatve thresholds 1. repo revenue (lading bth external a itesepment is 10% or more of he esi! revenue (atomal nd enteral) of al perig segments, 2, Profit or loss is 10% or more, in absolute amount, of the greater of: © the combined prof fal operating segment tat i no report alos; nd (G) te combined los of al operating segments thal epored aos; 3 assets are 10% or more of the combined assets of all operating segments. Atleast 75% of the eaiysrveave mst be incuded in reporable segments, Ths peetig = rt il below the quantitative tetbolds may need tobe ented asrepoable. _—=7 [ Segments tat fll below the thresbold may also be considered reportable, ad separicly asslo™® anagenn believes dat te information vou be we uc ie ful Sag [Information about other business activities and operating segments that are not reportable aCHAPTERS 8: Operating Se TERS 8: Operating Seguent [he sandard suggests 10 as practical mito the wamber of reporabie zy ‘The sanderd suggests 10 asa practical mito the numberof reporable segments spartely Gacloscd] | ss spznent information may otherwise become too detailed. 2; DISCLOSURE! | analysis 02: DISCLOSURES segment | The Tollowing man dao GUS Fe SG T. [Segment | The following must also be disclosed ifthe specified amounts are repuatiy ‘rovided tothe chief operating decision-maker: Ser aneype 2. 13. ‘evenues from external customers; intersegmeat revenues; | ‘interest revenue; | interest expense: depreciation and emorisation; impairment loss Segment Profit ‘Segment assets Segment isiltes additions to non-curret assets other material items of income and expense required by IAS 1 (Le. write- downs, restructuring, disposals, litigation setlemens); entity’ interest in the profit or loss of associates and joint ventures scott Fry the equity method; e Segments with the enya required | | Reconciliation Revonelliasi.ns ° "ss ceporl forall of tie 1 2 3 4 5. profit ec loss (beoue tn); asses; liabilities (if applicable); and every olher material item 1 2 3 ‘Revenues from extemal eustomers foreach product and service Geographical Area setts fom extemal customers and noo-curent assets atibued wo + the entity's country of domicile; ail foreign counties in total (if material than for each country separately); and ‘Major customer crareraty discloses the extent ofits reliance on major customers by if revenues from a sigle external customer amount to 10% or more ofthe entity's total extemal revenue; the total revenues from each such customer; and + the segment(s) reporting the reveaves. 1 _Kneotty need not disclose the identity of a major customerTERS CHAPTERS RATING SEGMENT TRS 8: OPERATING SEGMER™ PRACTICE QUESTIONS Question: Sans pens Fino nites el PeD WHE POTS Os se nthe basis of region. t doesnot curently segmental ‘pformation under IFRS 8 operating sepmects Ty oth reponal erent forthe year ended 31 May 2009 areas flows | ae | Eee |e ‘Airica. | Middle | Otte, | _ East L isin iio xen Revere 108, 300 2 00 10 intemal Revenue 10 20 0 50 ToaRocne i 0 = 7 air Segmental Profits 5 oo 100 ” Segmental Assets 150 800 1,600 wo Required: ‘Detemnine the entity’s reportable operating segments using the inf ing the information above.fof sel. Mal — a (CHAPTERS. Tr = Qucstion-3 ‘The Chief Accountant of PELF FIN STOCK Lid, gives the following data regarding its six epmens. Rein millions Particulars GO OI Cen eo Segment Asses so S10 s s 5 Segment Profits (Losses) (4) HD) ‘Segment Revenue 2m 3D 98 Required: ‘According to IFRS 8, which segments mist be reported?” ‘Question-+ ‘The following information relates to M/s Good a listed company with five divisions of operation for the yest ended June 30,2013. Division Particulars Rein million c D E ‘Revenue from external customers 200 6 “4 150 4 Inte-sepmental revenue 2 5 20 2 Reported profit 8 10 45 10 Total assets 4002000400 Required: ‘According to IFRS 8, which segments mus! ie yori? Questions _ ‘Alls Limited (AL), a listed company, is engaged in cements, energy, cloties, sugar and dairy businesses. Results ofeach business segment forthe year ended 31 December 2018 ar as follows: Business Total ‘External | Internal | “Assets | Liabilities Segments Profit Sale Sale 1 Ri in milion Cement 95 140 120 1500 - * 1200 Energy 2B 3 45 us 207 Clothes 6 150 : 995 596 Sugar 100 200 1s 1,600 950 Dairy cy 30 30 380 a7 Other Information: 1 Inter-segment sale are made ata contribution mark-up of 10%. 2 Operating expenses include AL's head office expenses amounting 10 Rs 25 million which have not been allocated to any segment, Furthermore, assets and lables amounting to Rs. 70 milion and Rs. 42 million have not been reported in the assets and liabilities of any segment 5IFRS CHAPTERS Operating Segue Required: {In accordance with the requirements of International Financial Reporting Standards: a) Determine the reportable segments of Alfa Limited (AL); and b) Show how these reportable segments and the necessary reconciliation would be disclosed in ay), financial statements forthe year ended 31 December 2018.ment SOLUTIONS Following ‘the reportable Sore segnents 1, Middle East a 2 Asia 3 Burope (1 Base Data She information canbe analysed s flows oe _Retions | arepe | [ asia | [ ates | [ oters ] [oat 7 | External Sales Tos 30092 0100 Interal Sales 10 10 10 _ io Tot Sales no oy iio Azo Profit a a Assets 130 fe) Cy) (W- 10% Test Ctrl for reporting segment deaiation Reporting pment if ented segment 1O%ofsaes ie Re 120 milion (1,200 10%) ‘Asi, Middl East 10% ot Poftie Rs. 18 milion — (40 10%) “es Wotan ie Rs. 320milion (20 10%) : (3) 5% le test ‘Reporting segment as identified above ‘Calculation: Esteenl wl (4) Midte East and Asia (600+ 300/100) nan Further sopment ood tobe deatified ws reportable Sepnca’s extra seis es tan 7%, Highest inte of ales amount ong Europe 942% ‘Temaining segments is Europe i.¢. 108 (108 / 1,100) Now exe tal of eprablespmets exceeds 75% Le, (72.73% +982) = 259% Anomer2 Far pat lowing we lc egments reportable spe 2 Canada 3 Iran((W-1) Basic Data con Limited segment entifeton el Iai, artes (coms) (Coc) Ci) se) CS) Ci) Cag Bomisie mB” sw 3s # “ eter segent Ses Be a ‘Tos Siles| i se ee eS i Profit ee ee ee) Aes re (2 0% Tat tei ering eget ienifention 1O%efsalesi2 Rs 100 milion (1,000 10%) Chin, Canad Weofproftie R27 malig (78x 10%) ina Wofases ie RS1000 milion (1000 x 10%) : Since Profi figueisighr, we wil take 10 of thst mount. Tot of rofte (oa+47+ 121 +12) n ‘Taal oases tony) 4 Greer is = (W3) 18% tet Reporting segment sented Calculation External sles (%) eatin ‘China Ginn rm Ca (200+ 90+ 1957612) maIFRS 8: Operating Segment ‘oe information canbe analysed flows PELF FIN STOCK Lid. ‘Segment Identifieation sin tions Partclars Geo mmme (raat SegnestReveme 200309299 8 00 Segnest Profs (50) (149) to nO} Semeat Assets sD as 0 5 s 51m W204 Test Criterin fr reporting sezmentWentieation _—_naprtogsepmet i ented segment _ 10% of sles Rs 100 mation (000x108) MNO 1W%oflossLeRS.21 milion (210% 10%) 5 10% of assets ie R10 mllion (108+) ‘Sie oss Gee is higher, we se om “oat of Profs, 0 ‘oat of lees ros) ato reneris ne (3) BY ane tes ‘ Reporting segment as identified above (Caleaation sternal aes (%) a Menttag MNandO {200-4320 +200 1,009 7% Furr spent neds tobe identified a reportable segment’ eter seis ethan 78% ighsin terms of sles amount among ® 93% ‘emmining pment is Rie R98 (681,000 Now exema sl of eporable segments exceeds 75% i.e. (72% +9.) = B18, Anener ‘Seneluion: Following re the eporable segments Wa 1D ABIFRS 8:0, (CHAPTERS (W-1) Basi Data ae gy ti Not eon — moc oo os BT »m «© # b Ff = —& ar ae 0) e = 0 6 a 40 9 10 45 10 ue = ee ee ee Som NNT natn ——_—_—Repvn en itt gr Toectaigk 3a (31100 ‘AD 1OMofproftieRs, 14min (114 10%) Ov of assets ie Re 460 milion (4,600 10%) (0-3) 15% sale test ‘Reporting segment a deatfied above Calculation A (200+ 150/484) Furer segment needs tobe identified as reporable segmens external sale is lss than 75% Highest in terms of sles amount among B (46/484) 98 remaining segments is Bie Rs 46 [Now external sale of reportable segments exceeds 75% ic, (72.32% + 9.5%) = 81.82%. Anawer-5 ‘2) Determination of reportable segments: Conck Following ae the reportable segments 1 Cement 2. Clothes 3. Sugar ((W-1 Basie Duta ‘The information canbe analysed a folows External Sales lnter-segment oval Sales Profit 98 a * oo 100 n Assets 1.500 a seCHAPTERS RS: 0 eat (2 10% Tet Leteriafer reporting sementidenieation _—_Reporing opment identi segment 10% of aes ie RS. 903 milion (903 x1% ene, Cts 1o%ofprostieRs.51 mille GlOn 109) ° cee 1W%ofasesieRS 482 milion (44204 10%) : (W-3) 25% sale test Reporting segment sented above Caletion sternal (%) Ceneat, Clots and Sugar (040 150+200)/573 551% (®) Disclosure inthe nancial statement of Alp Limited (N37) _ OPERATING SEGMENT RESULTS Cement | Clotes | Sugar ‘one Total — Re in loo Teens Fo 1 1 5 ema esos Inter segmentrevenue 12 1s 15 5439 x0 Segment profit 6 1 55 aan xo Sepnentasses = Ss 1600 as Gaseaey 4.0 SepmentLisbites 1 x $50 Sek Ga 3330 (374) Reconlation of reportable sement evens, prof or ln ans and ais, To cc) [2 z ‘Oiier | | Hinnnior]} [—Orier | |p tas | | alter | | adja | | ins os vay| | | [stm |i opment || tetas] | gece | Leer ‘re Revere (mor) 78 sm) i 8 = AQ60+ 1507 35) «Catan a38430 = Cltao-eas 135+ Scones pit 25 EF en id "AGS 60 100) Bose7 = Ciumresesaoynieato 1 490 Seg wet ams 15 . "4 ~"A(LS00 995+ 1600) = Bes 380) . 2 am Scone iis 2s a4 ‘(1.200 4 596 + 980) Beams >=CHAPTERS. TERS 8: 0, CHAPTERS 8: OPERATING SEGMENT ICAP PAST PAPER QUESTIONS stion-1 Diamond Limite, a tsted company, has st operating segments. These 7 segments doo economic charatrnics. Following spent wis informatio is valbe: Nave sie Profitiless) Required: [dentfy the reportable segments under IFRS slong ‘ication. o (Astomnn 201,03) 4(CHAPTERS SR: Operating See SOLUTIONS {Segment | Reportable [Explanation ‘ No 3 c > te F Ht ‘Because it fl fo meet any of he ctlena specifedin FRS® Yer [Because itmers allo ie ent peciia s FRS 1 ‘Yes | Boowuse its profit of Rs. 19,000 is greater han Rs. 3.700 Yes | Because its os of Rs. 73,200 is greater than Rs. 3.700, No | Because it fil to meet any ofthe criteria specified in FRS ‘Yes | Because its assets of Rs 18,000 are greater tun Rs 40 (W-1) Basie Data “The information canbe analysed as follows Diamond Limited Segment Identification ein lions Ce C29 CE) Geet) 4 BB 28 = + B we ns (322328 Assets saat 6 6s 8A ((W-2) 10% Test (Criteria for reporting segment identification ‘Reporting sepment i identified segment 10% of sales ie Rs.31.75 milion (917.5 x 10%) B 10% of loss ie Rs. 3.7 milion G7x10%) cD 10% of asset eRe. 884 milli (884x 10%) F Sine los igure is higher, we wil take 10% ofthat amount. Tot of Profits (19+23+29) 242 Total of losses (18+ 12+232) 37 Greater is (W3) 15% ah tet Reporting segment a denied above (Cateuation Esteroa sated) BCDandF (184422424429) 278 91.73% Note: The external revenue of reportable segments is 91.73% of total external revenue. The 75% tet is met and ‘to otber segments need wo be reported. =JERS 8: Oper CHAPTERS CHAPTER'S IFRS 8 OPERATING SEGMENT ICAP QUESTION BANK fone ‘company, is engaged in chemicals, soda ash, polyester, paints and Dae el sepa be yarn Mech 303s En Business Segments Ud Chemicals 1,790 1101 6 67 “2 Soda Ash 216 7 3 44 355 Polyester 2 8 2B us 4 Prins 247 2% 6 ra] 18 Pharma 252 31 2 2 9% Other Information: 4 Sats nce inter aegnat saleby Chic Polyester an Svs Ach is Ra. 28 nillion and Rs 10 milion respectively ats contbution margin of 30% 2 Operating expenses itd GL's ead fie expenses oes nillion which have not Pero alcated any sequent Frtemors, ase and llc». 0 RS. 150 million sad Rs 77 lion have pt been epondin the ast od abies» iy sopment Required: ») Show bow th le to tow thee repr er dad ey SHAY Feconlition Would be dito i G's Require: how bow these would be disclosed 'nGL's foancial statements forthe Year ended 31 March 2015.g ns. IFRS 8: Operating Segment, ‘SOLUTIONS Asswerl (a) Determination of reporiabe segments: Cosetuston: Following ae the reportable segments Chemicals 2 Sods Ash 3. Pharma ((W-1) Basic Data “he information canbe analysed as ellos Cteniea) ['So | [Far] [Fa | [Pharm re a | PS j semen Rs. million——— a Enema Sales bel) 1528S Intersepment(28+10) : 38 Toal Sales Ga Zia gave ee ros profit lin a 2% 3 1323 (Operating expenses 6 ey 09 aya Profit 2 i 9 Da, Asses LASS (W-2) 10% Test Criteria or reporting segment idetiexon_ Reporting segment identified _ 1O%ofsales ie Rs, 2732 milion 7323 10%) Chemicals O%efproft ieRs 152 million (11823 10%) 10% ofases ie Rs 14.5 milion (1.4854 10%) Soda Ash (0W-3) 25% sale test Reporting segment a Identified above Calcsation Eternal aes (%) eating Chemise and Soda Ah (1,752 + 216)/2,694 73.05% Further segment needs to be identified as reportable scemen's external sli et than 75% ‘Highest in terms of sules amount among Pharma 9.35% remaining ements is Pharma ie. 252 (52/2694) Now external sale of eprabesepments exons 75% i (73.05% + 9.39%) = 2.4%, =cat CHAPTERS () _Discloure in the anna statements of Gobar Lmted ‘RESULTS: Pn ona SE = Lee ST a ‘Revenue Fou oxeral TH ieee 5 : Inter segment revenue 8 : uM agrees 6 1935. @s5410) lin femme ethers “4 12 aT) 145 Segment assets @7 As Segment Liabilities roy 355 98 202(94+108) ier war, not ent 1 oss assets and Usb a B_]{_¢ (2) fe Reportable} | Ober | | Elimination | [~~ Other sjstments ‘Grom sveron ‘oven a a = B(L3904+216 +252) 2 BQirs247) Segment prot 17 38 a a: ~ -A(038 + 60 +19) an 5) 1966 = BQ5+I0) = C8100 x30) — Sepnent set ra on . = -A(GT+ 444+ 132) 150 Las = Bqus+127) Sepneat lilies a - = A(H2+355 +98) a n 1a 2 BG4+ 108) Anewer2 2, s Pakistan (ball) Bs. in iliot ee 1694 Entity’ sale to 7 Revenue from 2 customers is Rs, 700 million and {is included in XXX segment eee— SST CHAPTER-8 won 8: OPERATING SEGMENT MULTIPLE CHOICE QUESTIONS ‘An operating segment sa component of an undertaking ‘Gy that engages in business activities fror which it may ear revenues and incur expenses (Gacluding revenues and expenses relating to transactions with other componens ofthe same underaking) (i) hose operating resulls are regularly reviewed by the undertsking’s chief operating Gevision maker to make decisions about resources to be allocated to the segment and assess its performance (Gi) for which discrete fnancal information is available (iv) _ which is taxed separately from other components @) (to fii) only ©) Gre only © — @wtivall @ — @,Giand vy) IFRS 8 shall epply to (listed companies Gi) any company reporting under IFRS) dit wish.» provide the information (i) all other companies reporting use (@ (toi) only @) (toi all © (only @ _ Gionly Head office expenses: (@) canbe allocated to segments on a reasonable basis, (b) ust not be allocated to segments (©) mustbe allocated to segments based on their turnover (@)__auustbe allocated to segments based on ther profit before wx ‘Two or more operating segments may be aggregated into a single operating segment if ‘aggregation is consistent with the Jcore principle of IFRS 8, the segments have similar economic characteristics, and the segments are similar in each of the following respects: (the mature ofthe products and services i) the mature ofthe production processes Gi) the type or class of eliet for their products and services (Gv) the methods used to distribute their products or provide their services (©) if applicable, the nature ofthe regulatory environment, for example, banking, insurance public utilities (4) staffoumbers @ Hwan ©) (Gi) oaty (© (i)to() only @ — @t0@)oaly =CHAPTER. IFRS 8: Operatin, SOLUTIONS on. (@)__| Entity is to be taxed separately is not mentioned in IFRS. —~ 02. (©) | i. TFRS-08 applicable to listed company only | ii, No ; iii___No 03. (a) : i 04. (@)__| Staff number is not the factor to combine two or more segments. It is not mentioned in FR”