An Analysis of The Impact of Adopting IFRS 8 On The Segment Disclosures of European Blue Chip Companies

Journal of International Accounting, Auditing and Taxation 21 (2012) 79–105
Contents lists available at SciVerse ScienceDirect
Journal of International Accounting,

Auditing and Taxation
An analysis of the impact of adopting IFRS 8 on the segment

disclosures of European blue chip companies
Nancy B. Nichols a,∗ , Donna L. Street b , Sandra J. Cereola a
a
James Madison University, School of Accounting, Harrisonburg, VA 22807, USA
b
University of Dayton, Department of Accounting, Dayton, OH 45469-2242, USA
a b s t r a c t
Amidst the IASB’s post-implementation review of IFRS 8, we examine how the standard’s adoption changed the reporting of segments
by European blue chips (i.e. companies comprising the top tier index of 14 European stock exchanges). We focus on anticipated benefits
articulated in the IASB’s Basis for Conclusions and concerns expressed by IFRS 8 opponents.
In addition to convergence with U.S. GAAP, IFRS 8 results in the reporting of significantly more operating segments on average. However,
most companies report the same number or fewer segments. Refuting claims regarding the loss of geographic data at the entity-wide level,
we identify an improvement in the fineness of disclosures and a significant increase in the disclosure of geographic groupings. We do not
identify an improvement in consistency of segment disclosures with other sections of the annual report, which is due to the consistency
already achieved under IAS 14R.
IFRS 8 results in a significant decline in the number of reportable segment information items (notably liabilities) and a significant decline
in the reporting of capital expenditures at the entity-wide level. Furthermore, adoption of the standard produces a lack of comparability
in segment profitability measures and extensive reporting of non-IFRS measures. However, almost all companies report a measure of
segment profitability tied to a number on the consolidated income statement or reconciled to the income statement.
© 2012 Elsevier Inc. All rights reserved.
1. Introduction
In November 2006, the International Accounting Standards Board (IASB) issued International Financial Reporting Standard
(IFRS) 8, Operating Segments. The standard became effective January 1, 2009 with early adoption encouraged (IASB, 2006a). In
the Basis for Conclusions (BC) accompanying IFRS 8, the IASB explains that in September 2002 the Board added a short-term
convergence project to its agenda (IFRS 8, BC2). The convergence project was conducted jointly with the United States (U.S.)
Financial Accounting Standards Board (FASB) and focused on reducing differences between IFRSs and U.S. Generally Accepted
Accounting Principles (GAAP) that could be resolved in a relatively short time frame. Since the IASB’s predecessor (the
International Accounting Standards Committee (IASC)) worked closely with the FASB and Canadian Accounting Standards
Board during the late 1990s to issue comparable segment reporting standards, the Boards believed that aiming to eliminate
the few remaining differences between International Accounting Standard 14 Revised (IAS 14R) and the North American
approach represented a logical selection for short-term convergence.
Based on a review of the academic research, the IASB concluded that Statement of Financial Accounting Standard (SFAS)
131, Disclosures about Segments of an Enterprise and Related Information (now ASC 280) (FASB, 1997), provides more useful
information to users than its predecessor SFAS 14 (IFRS 8, BC6). Specifically, the academic research provides evidence that
adoption of SFAS 131 in the U.S.,
• increases the number of reported segments and provides more information,
∗ Corresponding author. Tel.: +1 540 568 8778; fax: +1 540 568 3017.
E-mail addresses: nicholnb@jmu.edu (N.B. Nichols), dstreet1@udayton.edu (D.L. Street), cereolsj@jmu.edu (S.J. Cereola).
1061-9518/$ – see front matter © 2012 Elsevier Inc. All rights reserved.
http://dx.doi.org/10.1016/j.intaccaudtax.2012.07.001
80 N.B. Nichols et al. / Journal of International Accounting, Auditing and Taxation 21 (2012) 79–105
• enables users to see an entity through the eyes of management,

• enhances consistency with the management discussion and analysis (MD&A) or other annual report disclosures, and
• provides various measures of segment performance.
As part of the IASB’s due process, segment reporting was discussed with financial statement users (IFRS 8, BC 7-8). Most
of the users interviewed favored the SFAS 131 management approach over IAS 14R that, while based on the management
approach, includes a risks and rewards qualification.
Our study addresses how the IASB’s convergence with the ‘North American’ management approach in IFRS 8 changed
the segment reporting of European blue chips (i.e. companies comprising the top tier index of 14 European exchanges) that
previously reported under IAS 14R. Inter alia, we address whether IFRS 8 achieves the IASB’s desired outcomes of “some
entities will report more segments” (IFRS 8, BC9c) and “entities will report segment information that will be more consistent
with other parts of their annual reports” (IFRS 8, BC9b).
Since it issued IFRS 8 amid significant concerns regarding adoption of the management approach, the IASB agreed to a
post-implementation review of the standard. Amendments made in 2008 by the IFRS Foundation Trustees to the IASB’s Due
Process Handbook formalize the process of conducting post-implementation reviews as part of the life cycle of major IASB
projects. The first two IFRSs identified by the IASB for post-implementation reviews are IFRSs 8 and 3. The review of IFRS 8
is underway and targeted for completion at the end of 2013. Thus, our findings are highly policy relevant as they will inform
the IASB’s post-implementation review of IFRS 8.
2. The road to convergence and IFRS 8
The IASC articulates its objectives for revisiting IAS 14 and provides arguments for and against IAS 14 in a Draft Statement
of Principles (DSOP). After considering the pros and cons, an IASC Steering Committee concludes that IAS 14 should be
revised to, among other things,
• reduce the use of alternative practices and ensure that segment information is understandable and consistent between
enterprises,
• provide clearer guidance for identifying and measuring such items as segment revenue, segment expenses, segment results,
and segment assets, and
• consider requiring additional segment information useful to investors and other decision makers (IASC, 1994, 3).
An Exposure Draft (ED) was issued by the IASC in December 1995 entitled, Reporting Financial Information by Segment.
The proposals are very similar, but not identical, to those set forth in EDs issued at approximately the same time by the U.S.
and Canadian accounting standard setters. IAS 14R was issued in 1997.
As noted above, while the IASC was working on the revision of IAS 14, the U.S. FASB and Canadian Accounting Stan-
dards Board jointly developed Reporting Disaggregated Information about a Business Enterprise. The North American standard
was issued in 1997. Despite substantial efforts to issue converged standards, key differences remained between the North
American and international standards.
IAS 14R sets forth a two-tier approach requiring disclosure by both line of business and geographic regions (IASC, 1997).
Primary segments are based on the management approach modified by a risks and rewards qualification. Each primary
segment determined by the management approach is to exhibit similar risks and rewards characteristics; otherwise, the
groupings are modified based on the risks and rewards approach.
Under IAS 14R if primary segments are based on line of business (geography), the second tier is based on geography (line
of business). If the management structure resembles neither line of business nor geographic segments, IAS 14R requires
entities to choose between business and geographic segments for primary and secondary segments.
In comparison to its predecessor, IAS 14R significantly expands the items of information disclosed for primary segments
and requires entities to disclose:
• Revenue (external and inter-segment)

• Result
• Assets
• Basis of inter-segment pricing
• Liabilities
• Capital expenditures
• Depreciation
• Non-cash expenses other than depreciation
• Equity method income
• Reconciliation to consolidated accounts.
N.B. Nichols et al. / Journal of International Accounting, Auditing and Taxation 21 (2012) 79–105 81
Matrix primarily line of business: Electrolux (two lines of business with one of the lines of business disaggregated
into four geographic regions)
Consumer Durables Professional Products
Europe North Latin Asia/

America America Pacific
Matrix primarily geographic: KPN (four geographic segments with one geographic region disaggregated into four
lines of business)
The Netherlands Germany Belgium Rest of

World
Consumer Business Getronics Wholesale &

Segment Segment Segment Operations
Mixed primarily line of business: Fortum (four lines of business exclusive of Russian operations and one
geographic region Russia)
Power Heat Distribution Markets Russia
Mixed primarily geographic: Carrefour (four geographic areas and one line of business)
France Europe Latin America Asia Hard Discount

Stores
Fig. 1. Examples of matrix and mixed segment reporting.
For secondary segments, IAS 14R requires disclosure of revenue, assets, and capital expenditures. Additionally, IAS 14R
encourages, but does not require, disclosure of segment cash flow information. The standard allows matrix reporting.
Examples of matrix and mixed reporting are provided in Fig. 1.
SFAS 131 reportable segments are determined based on the management approach. However, there is no risks and
rewards qualification. Primary differences between SFAS 131 and IAS 14R include:
• SFAS 131 does not have a rule requiring disclosure of segment liabilities;
• SFAS 131 does not require segment reporting on a secondary basis, although for each reportable segment not based on
differences in products/services, SFAS 131 requires disclosure of revenues from transactions with external customers for
each product/service. Similarly, for each reportable segment not based on geography, entities must disclose sales and
long-lived assets for the country of domicile and for any country accounting for 10% or more of sales and/or assets.
Additionally, while IAS 14R requires entities to choose between line of business and geographic segments for primary
segment disclosures, SFAS 131 allows for mixed (i.e. a combination of line of business and geographic) reportable segments.
Another difference is that while IAS 14R focuses on segment information consistent with the consolidated statements, SFAS
131 focuses on information utilized by management to operate the business and allows the reporting of non-GAAP measures.
Following the Board’s decision to add segment reporting as a short-term convergence project with the U.S., the IASB
concluded that both academic research and meetings with analysts reveal that the management approach is preferred and
provides more useful information (IASB, 2005). Announcing the issuance of ED 8, then IASB Chair Tweedie emphasized the
benefits of adopting the U.S. management approach to segment reporting including the opportunity for users to see an entity
through management’s eyes and the entity’s ability to provide the information at a low cost (IASB, 2006b).
IFRS 8 was issued in November 2006. While the standard follows the core principle of IAS 14R, its adoption may result in a
change in an entity’s segments due to elimination of the risks and rewards qualification and elimination of the requirement
that primary segments be based exclusively on either line of business or geography. The IASB anticipates that a potential
benefit of adopting the management approach will be that “some entities will report more segments” (IFRS 8, BC 9c).
As explained in the IFRS 8 Basis for Conclusions, most respondents to ED 8 support the management approach whereby
the amounts disclosed for each segment represent the measure reported to the Chief Operating Decision Maker (CODM).
Most respondents furthermore indicate that,
. . . although the IAS 14 approach would enhance comparability by requiring entities to report segment information
that is consistent with IFRSs, the disclosures will not necessarily correspond to segment information that is reported
to management and is used for decision making (IFRS 8, BC 9c).
Setting forth an alternative view in their comment letters to ED 8, some respondents believe international convergence
should be towards IAS 14R as opposed to the North American approach (IFRS 8, BC 11). These commentators indicate that
the IAS 14R approach yields comparability across entities because the standard defines the measures of segment revenue,
expense, result, assets and liabilities and requires segment measures to be prepared in conformity with the accounting
policies of the entity. In response to these concerns, the IASB calls attention to requirements for an explanation of the
measurement of segment profit/loss and segment assets and for reconciliations of segment amounts to amounts recognized
in the financial statements (IFRS 8, 27 and 28). The IASB thus believes that users should be able to “understand and judge
appropriately the basis on which the segment amounts were determined” (IFRS 8, BC 14).
Since IFRS 8 does not define segment revenue, result, assets or liabilities, entities have more discretion in determining
what is included in segment profit/loss as long as the amounts are consistent with internal reporting practices. In their
dissenting opinion, Board members Gelard and Leisenring express their concerns regarding the lack of specificity for the
measurement of a segment’s profit/loss and the opportunity for management to report non-GAAP measures.
In Improvements to IFRSs issued in 2009 (IASB, 2009), the IASB amends paragraphs 23 and 25 of IFRS 8 clarifying that a
measure of segment assets should be disclosed only if that amount is regularly reported to the CODM (IFRS 8, BC 35A). IASB
member Cooper dissented from the amendment because he believes it weakens the standard and potentially eliminates a
disclosure that may be important for the user to understand the performance and financial position of the entity.
Several respondents to ED 8 express concern regarding the level of detail provided by the reconciliations of segment and
consolidated data (IFRS 8, BC 40). Their argument is that if information is measured based on management information,
reconciliations are needed for individual reportable segments between the segment amounts and the corresponding IFRS
measure. These commentators believe that reconciling only total reportable segment amounts to corresponding amounts
in the consolidated accounts does not produce useful information. The IASB’s position is that this recommendation would
yield two complete segment reports – one based on internal reporting and another on IFRSs. The IASB concludes that the
cost of providing two sets of segment information is not justified (IFRS 8, BC 42).
Unlike SFAS 131, IAS 14R requires disclosure of segment liabilities. IFRS 8 maintains the disclosure requirement for
segment liabilities “if those amounts are regularly provided to the chief operating decision maker notwithstanding that
such a disclosure would create divergence with SFAS 131” (IFRS 8, BC 38). The IASB believes that if segment liabilities are
considered when assessing the performance of, and the allocation of resources to, the segments, the information is consistent
with the management approach. Furthermore, the Basis for Conclusions explains that the disclosure of segment liabilities
is supported by some commentators to ED 8, most notably commentary from users.
Another difference between IFRS 8 and SFAS 131 is the definition of ‘long-lived’ assets. SFAS 131 focuses on hard assets
that cannot be readily removed, thereby, appearing to exclude intangible assets (IFRS 8, BC 60). On the other hand, IFRS 8’s
definition of non-current assets includes intangibles.
Additional relevant changes from IAS 14R incorporated in IFRS 8 include,
• entities with one reportable segment are required to disclose information regarding products and services, geographic
areas and major customers,
• interest revenue and interest expense are reported separately (unless the majority of the segment’s revenue is from interest
and the CODM relies on a net measure),
• if material, revenues and assets by individual foreign country are disclosed, and
• information about transactions with major customers is required if the revenues equal 10% or more of the entity’s revenues.
The proposal in ED 8 to converge international and U.S. segment standards raised concerns in the U.K. and European
Parliaments. The Economic and Monetary Affairs Committee of the European Parliament commented that adopting IFRS 8
would “import into EU law an alien standard (U.S. FAS 131) without having conducted any impact assessment” (Economic
and Monetary Affairs Committee, 2007). In the U.K., 13 members of the House of Commons submitted a parliamentary
motion commenting that IFRS 8 is “totally unacceptable because it gives company directors carte blanche to decide what
they disclose and how they disclose it and does not require consistency of disclosure” (House of Commons, 2007).
In a 2007 resolution addressing the European Commission’s endorsement of IFRS 8, the European Parliament outlines
a number of concerns and conditions. One concern is that the standard requires less geographic information than IAS 14R.
As a condition of support, the resolution requires the Commission to closely follow application of IFRS 8, paying particular
attention to geographic reporting, segment profit or loss, and use of non-IFRS measures (European Parliament, 2007).
3. Literature review
3.1. Research on SFAS 131
In the IFRS 8 Basis for Conclusions (BC 6), the IASB summarizes the findings of academic research supporting its decision
to adopt the provisions of SFAS 131. Among other things, research findings indicate, in general, that application of SFAS
131 results in more useful information than its predecessor. Specifically, adoption of the management approach in the U.S.
increases the number of reported segments and provides a greater quantity of information; enables users to see an entity
through the eyes of management; enables an entity to provide timely segment information for external reporting with
relatively low incremental cost; enhances consistency with the management discussion and analysis or other annual report
disclosures; and provides various measures of segment performance.
Several studies evaluating its adoption in the U.S. provide evidence that SFAS 131 resulted in an increase in the number
of reported segments. Street, Nichols, and Gray (2000) identify an increase in the number of segments reported, a reduction
in the number of single segment companies, and an improvement in the consistency of segment information provided in
the footnotes and the introductory annual report information and MD&A. The findings of Street et al. (2000) also illustrate
the lack of comparability resulting from the FASB’s decision not to define segment profit/loss.
Herrmann and Thomas (2000) find that more than two-thirds of their sample companies redefine their primary operating
segments under SFAS 131 and that companies disclose more items for each operating segment. For entity-wide disclosures,
they find an increase in country-level disclosures with a corresponding decrease in broader geographic area disclosures.
They also identify a significant decrease in the number of companies reporting earnings by geographic area. Ettredge, Kwon,
and Smith (2002) also identify a significant increase in the number of segments reported under SFAS 131. These authors
attribute the greater number of segments to greater operational complexity and prior under-reporting.
Berger, Hann, and Piotroski (2003) also find an increase in the number of reported segments and the disclosure of more
disaggregated information under SFAS 131. Their findings indicate that analysts and the market had access to some of the
new segment information required by SFAS 131 before it was made public. However, analysts’ and market expectations were
still impacted by release of the new data. By increasing disaggregation, SFAS 131 requires companies to release previously
withheld information about their diversification strategies. The new information impacted market valuations and motivated
changes in behavior consistent with improved monitoring.
Other studies evaluate the impact of SFAS 131 on users. Behn, Nichols, and Street (2002) compare forecast errors for
models utilizing SFAS 14 and 131 data. They identify a significant improvement in the predictive accuracy of geographic
sales disclosures provided under SFAS 131, thereby supporting the FASB’s argument that segment information by country
is more informative and useful. Ettredge, Kwon, Smith, and Zarowin (2005) examine companies that moved from claiming
to be single segment companies to companies disclosing multiple segments under SFAS 131. They identify an improvement
in the market’s ability to predict earnings for those companies compared to companies that remained single segment.
Studies investigating the revised geographic disclosure requirements of SFAS 131 find that companies provide more
country specific disclosures (Nichols, Street, & Gray, 2000) and that most companies provide country-level disclosures using
thresholds of less than 10% (Doupnik & Seese, 2001).
More recent studies analyze the impact of eliminating the geographic earnings disclosure for U.S. companies reporting line
of business operating segments. Hope, Thomas, and Winterbotham (2006) examine the impact on earnings predictability
for multinationals eliminating their geographic earnings disclosure under SFAS 131 and find no evidence of an effect on
analysts’ forecast accuracy or dispersion. They conclude that the FASB’s decision to eliminate the entity level geographic
earnings disclosure does not hamper users’ ability to predict the earnings of U.S. multinationals.
On the other hand, Hope, Kang, Thomas, and Vasvari (2009) provide evidence that companies that increase the number
of geographic segments or continue to disclose geographic earnings under SFAS 131 have foreign earnings that are priced
higher than those of companies that do not increase their number of geographic segments or that discontinue reporting
geographic earnings. These authors conclude that higher-quality geographic segment disclosures allow investors to better
relate reported performance to foreign operations.
3.2. Research on IAS 14R
Nichols and Street (2002) examine the segment disclosures of 210 companies reporting under IAS 14R. They find that
the move from IAS 14 to IAS 14R resulted in:
• a significant increase in the items of information disclosed for each primary and secondary segment,
• a significant increase in consistency of the primary segment information with the introductory annual report material and
MD&A, and
• a significant decrease in companies claiming to operate in one segment.
On a less positive note, the study finds that following adoption of IAS 14R a number of companies continue to claim to
operate in one segment while the annual report taken as a whole suggests the existence of multiple line of business segments
and many companies continue to utilize the broad, vague geographic groupings for which the original version of IAS 14 was
criticized. Additionally, the authors identify several instances where companies do not provide all the disclosures required
by IAS 14R for primary and/or secondary segments.
3.3. Preliminary IFRS 8 research and regulatory warnings
In a press release, the U.K. Financial Reporting Review Panel (FRRP, 2010) expresses concerns regarding how U.K. com-
panies are reporting the performance of key parts of their business under IFRS 8. Following a review of a sample of 2009
interim accounts and 2008 annual accounts from early adoptors, the FRRP asked a number of companies to provide additional
explanations where:
• only one operating segment is reported, but the group appears to be diverse with different businesses or with significant
operations in different countries,
• the operating analysis set out in the narrative report differs from the operating segments in the financial statements, and
• the titles and responsibilities of the directors or executive management team imply an organizational structure which is
not reflected in the operating segments, or the commentary in the narrative report focuses on non-IFRS measures while
the segment disclosures are based on IFRS amounts.
The FRRP encourages Boards of Directors to test their initial conclusions about the company’s segment reporting by
considering, among other things, whether information about reportable segments is based on IFRS measures or on an
alternative basis and whether reported segment amounts have been reconciled to the IFRS aggregate amounts.
Ng (2010) discusses a review by the New Zealand (NZ) Securities Commission of issuers’ financial statements focusing on
the application of NZ IFRS 8. The report highlights the importance of identifying the CODM and clarifies that while frequently
the CODM is the chief executive officer or the chief operating officer, it may be a group of executive directors. The report
cautions that when the CODM is identified as the Board, it normally should be an executive board responsible for making
operating and resource allocation decisions. When the Board is identified as the CODM and the directors are non-executive
and are stated as being responsible for strategy rather than for making operating decisions, the company will likely be
approached by the NZ Securities Commission. Questions may also be forthcoming from the Commission when business
segment or geographic disclosures in other parts of the annual report differ from the footnote disclosures.
Crawford, Extance, Helliar, and Power (2012) report findings of their examination of the impact on 150 U.K. companies of
adopting IFRS 8. The two research questions considered are whether segment disclosures by U.K. companies changed after the
introduction of IFRS 8 and whether a small sample of users, preparers and auditors have considered whether IFRS 8 provides
more decision-useful information than IAS 14R. Crawford et al.’s analysis reveals, on average, an increase in the number of
reportable segments (from 3.30 to 3.56) and an increase in the geographic information by customer location. However, the
number of items disclosed for each segment decreases. Specifically, the authors note a decrease in the disclosure of capital
expenditures, liabilities and assets. The study also finds that, contrary to expectations, only a small number of companies
disclose non-IFRS segment measures. In response to the second research question, Crawford et al. (2012) find that “a majority
of the interviewees welcomed the management approach underpinning IFRS 8.” Preparers indicate the strongest support
for the new standard.
4. Research questions
To examine the impact on European blue chips of adopting IFRS 8 and provide evidence regarding whether the IASB
achieved its stated objectives when issuing the standard, we address the following research questions:
• To what extent did companies adopt IFRS 8 early?

• Are the operating segments reported under IFRS 8 consistent with other parts of the annual report?
• What types of reportable segments are disclosed under IFRS 8 (line of business, geographic, matrix or mixed)?
• Has adoption of IFRS 8 resulted in the reporting of a greater number of reportable segments? Has the number of companies
claiming to operate in a single segment declined? For those reporting as single segment companies, is this consistent the
complete annual report?
• What items of information are disclosed for reportable segments under IFRS 8? What items are disclosed for segment
profitability? What voluntary disclosures are provided? How does IFRS 8 disclosures compare to those provided under IAS
14R?
• Do companies provide appropriate reconciliations of reportable segment profitability, assets, and liabilities to the consol-
idated financial statements?
• What items are reported as entity-wide data for products and geographic regions under IFRS 8? How does the IFRS 8
disclosures compare to those provided under IAS 14R? To what extent has adoption of IFRS 8 impacted the fineness of the
geographic groupings reported as entity-wide disclosures?
• How many companies identify the CODM in their segment footnotes? For those identifying the CODM, what is the title of
the decision maker?
5. Sample selection, data collection and sample demographics
Our research identifies the impact of reporting under IFRS 8 for companies comprising the top tier index of 14 European
stock exchanges. We exclude U.K. companies from our study given Crawford et al.’s (2012) comprehensive study addressing
the impact of IFRS 8 on these companies.
We obtained the 2008 and 2009 annual reports for companies comprising the top tier index, as of the end of 2009, of
the national stock exchange indices in Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, Luxembourg, the
Netherlands, Norway, Spain, Sweden, and Switzerland.1 For companies adopting IFRS 8 early, we collected annual reports
for the year of early adoption and the year preceding adoption. Appendix A lists the sample companies by country (index).
The companies comprising the 14 individual indices yield a total of 361 companies. However, nine of the companies are
cross-listed and appear on two of the sample indices. The nine cross-listed companies are assigned to the index in Table 1
associated with their country of domicile and excluded from the index where they are cross-listed. Our total potential sample
comprises 352 companies. As shown in Table 1, we exclude three Swiss companies listed in the U.S. and three Norwegian
OBX companies headquartered in Bermuda since these six companies publish U.S. GAAP financial statements. We exclude
seven companies for which we are not able to obtain English-language financial statements. Four additional companies are
deleted for various other reasons (i.e. one company has two classes of stock included on the same index, one company is a
listed partnership, etc.). Thus, our final sample includes 335 companies.
Each annual report was analyzed carefully and data were hand collected to address the research questions. To promote
accuracy, each annual report was reviewed by at least two researchers and any discrepancies were discussed and resolved.
Table 1 reports the mean total assets and revenues (in U.S. dollars) for year 2008 for the sample companies in total as well
as by country and by industry. The sample includes many of the world’s largest companies. The mean total assets is $U.S.
125,931 million and mean revenues is $U.S. 24,357 million. Manufacturing companies constitute the largest portion of the
sample (135 companies, 40%). The second largest category by industry represented in the sample is Finance, insurance, and
real estate with 76 companies (23%).
6. Findings
6.1. Extent of early adoption (not tabulated)
The IASB encouraged early adoption of IFRS 8, and 32 of our European blue chips responded (six France; five Spain; four
Austria; three each Finland, Italy, the Netherlands and Switzerland; two each Germany and Norway; and one Sweden).2 Two
companies early adopted in 2006, 10 in 2007, and 20 in 2008. Twenty identify IFRS 8 operating segments as line of business,
five as geographic and seven as mixed.
A review of the annual reports of early adoptors suggests a rational for why most early adopted. For example, four changed
management structure, 11 had no change in reportable segments, two disposed of segments, and six had major acquisitions.
TeliaSonera early adopted in 2007 and illustrates reporting under the management approach. In the introductory material
to its 2006 annual report, the company states, “On January 1, 2007, TeliaSonera introduced a new organization to capture
future growth.” Furthermore, the company notes that its new organizational structure will focus on four international
business areas. Appendix B provides a comparison of TeliaSonera’s reporting under IFRS 8 and IAS14R. A graphic in the
annual report (p. 21) shows that the head of each of the four areas reports directly to the President and Chief Executive
Officer.
The 2006 Management Report discusses results based on geographic profit centers. The primary segment footnote infor-
mation is based on these 10 geographic centers. Second tier sales, operating assets, and investments are presented for three
products.
TeliaSonera begins its 2007 annual report by illustrating its four business segments. This analysis is followed by a graphic
representation of geographic coverage. The Management Report presents results based on the four business segments. In
the footnotes, reportable operating segment information is provided for the four segments (three business service areas and
1
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. Therefore, when referring to 2009 year-ends, we are referencing the first year of required IFRS 8 adoption. In
other words, for a company with a March 31, June 30, or September 30 year-end, the 2010 IFRS 8 information is included in our 2009 analysis and the 2009
IAS 14R information is included in our 2008 analysis.
2
These include Erste, Immofinanz, Raiffeisen International Bank, Weinerberger, Neste Oil, Pohjala Bank, TeliaSonera, Air Liquide, GAZ de France Suez,
Peugeot, PPR, Suez Environment, Technip, Beiersdorf, BMW, Autogrill, Enel, Tenaris, DSM, Royal KPN, TNT, DNB Nor, Telenor, Abengoa, Ebro Foods, Gas
Natural, Iberdrola, Iberdrola Removal, Nokia, Julius Baer Group, SwissCom and Syngenta.
86
Table 1
European blue chip companies (2009). Sample section process and sample demographics by country (index) and industry.
N.B. Nichols et al. / Journal of International Accounting, Auditing and Taxation 21 (2012) 79–105
Sample selection process Sample demographics
Top – tier Companies Cross -listed U.S. GAAP Annual report Other Total Final 2008 US$ 2008 US$
national index comprising index not in English deletionsa removed sample Mean assets Mean revenue
(in millions) (in millions)
By country
Austria ATX 20 0 20 29,901 7,350
Belgium BEL 20 20 1 1 19 46,827 8,131
Denmark OMXC 20 20 1 1 19 44,954 8,251
Finland OMXH 25 24 1 1 23 40,928 8,323
France CAC 40 40 1 1 39 273,137 47,533
Germany DAX 30 30 0 30 263,286 55,452
Ireland ISEQ 20 20 0 20 37,550 5,409
Italy MIB 30 40 1 1 39 131,863 24,324
Luxembourg LUXX 12 4 2 6 6 260,474 52,805
Netherlands AEX 25 1 1 1 3 22 131,234 44,912
Norway OBX 25 3 3 22 22,839 8,370
Spain IBEX 35 35 2 1 3 32 112,892 20,063
Sweden OMSX 30 30 1 1 2 28 66,555 14,032
Switzerland SMI 20 1 3 4 16 247,273 24,469
Total 361 9 6 7 4 26 335 125,931 24,357
By industry
Agricultural 4 3,100 2,525
Mining 21 35,060 44,710
Construction 16 26,534 13,521
Manufacturing 135 26,634 20,399
Transportation 10 56,634 23,473
Communications 22 41,624 22,092
Electric, Gas & Sanitary Services 18 95,604 42,370
Wholesale Trade 6 20,906 26,442
Retail Trade 10 123,479 37,041
Finance, Insurance, and Real Estate 76 429,765 27,797
Services 17 8,790 7,228
a
i.e., a company with two classes of stock with both classes listed on the same index, a listed partnership, etc.
Table 2
Impact of IFRS 8: consistency of segment footnote disclosures with other sectionsa of the annual report.
IAS 14R IFRS 8
Consistent Not consistentb No information Total Consistent Not consistent No informationc Total
312 (96%) 14 (4%) 0 326 312 (96%) 12 (3%) 2 (1%) 326
a
Includes Management Report/Financial Review/MD&A, shareholder’s letter, business at-a-glance, etc.
b
Reporting on additional or different “segments” in other sections of the annual report in comparison to the primary/operating segments reported on
in the segment reporting footnote.
c
The consolidated financial statements and footnotes are available in English but other sections of the annual report are not.
Eurasia). The first three segments separate the Western European operations by business service area. The fourth segment
includes all business operations in Eastern Europe and Asia. While allowed under IFRS 8, mixed reportable segments are
not allowed under IAS 14R. TeliaSonera also discloses entity-wide sales for three products. Net sales by external customer
location and non-current assets are presented for three individually material countries. Additionally, net sales by external
customer location are disclosed by economic region. By early adopting IFRS 8, TeliaSonera was able to disclose the same
information in the segment footnote as provided to the CODM under the new organizational structure.
Autogrill early adopted IFRS 8 in 2008. The 2007 introductory annual report material recognizes the interaction
between the business and geographic segments. The Management Report describes results and other information by Geo-
organisational macro-areas, Business segments (Motorways, Airports, Railway stations, Airports, and Other) and Sectors
(Food and beverage; Retail and duty-free; In-flight; and Other). At times, information in the Management Report is presented
using matrix reporting (i.e. Sectors by Business segments). The footnote disclosure (see Appendix B) provides primary seg-
ment information for so-called ‘geographic’ segments (Italy; U.S. and Canada; Rest of Europe; Aldeasa; and Alpha Group)
and detailed second tier information for the same business segments described elsewhere in the annual report.
Following adoption of IFRS 8 in 2008, Autogrill reports its operating segments using a matrix approach that aligns with
its organizational structure. The segment footnote indicates that the adoption of IFRS 8 results in a restatement of financial
information to disclose operating segments that are consistent with the internal reporting to management. Autogrill’s foot-
note discloses operating segment data for five reportable segments with Food and Beverage separated into three geographic
segments (see Appendix B).3 Separating the business line into three geographic segments provides the financial statement
user with a level of information not previously provided. Again using matrix reporting, Autogrill presents entity-wide rev-
enue disclosures for six geographic areas within each of the three operating segments/products, thereby providing the user
with revenue information separated into 18 categories.
In addition to the 32 companies noted above, early adopters of IFRS 8 include six that issued their first IFRS statements in
2007 and two that issued their first IFRS statements in 2008.4 For all eight, the type of operating segments reported under
IFRS 8 is consistent with the previous year’s reporting (four lines of business, one geographic, one matrix based primarily
on line of business and one mixed based primarily on geographic, and one single segment). This consistency in the type of
segments reported is not surprising since all eight companies reported under U.S. GAAP and SFAS 131 prior to moving to
IFRS.
6.2. Consistency of segment information with introductory annual report
In the IFRS 8 Basis for Conclusions, the IASB references academic findings on applying SFAS 131. This research provides
evidence that in the U.S. the management approach of SFAS 131 “enhanced consistency with the management discussion and
analysis or other annual report disclosures” (IFRS 8, BC6 (d), see also Street et al., 2000). However, research by Nichols and
Street (2002) regarding the adoption of IAS 14R indicates that 81% of their sample companies report segment information
consistent with the introductory annual report material and 86% report primary segment information consistent with the
Management Report/Financial Review after adopting IAS 14R. Given the level of post-IAS 14R consistency, we do not expect
to find a further significant increase in consistency following adoption of IFRS 8.
For our sample of European blue chips, we review the primary/reportable segments disclosed in the IAS 14R and IFRS 8
footnotes and the “segments” described and discussed in other sections of the annual report. We define “not consistent” as
reporting on additional or different “segments” in other sections of the annual report in comparison to the primary/operating
segments reported on in the footnote. As shown in Table 2, in their last year of reporting under IAS 14R, most sample
companies report segment information that is consistent with other sections of the annual report; only 14 (4%) exhibit
inconsistencies. Single segment companies are the most problematic with six (26%) exhibiting inconsistencies between the
segment footnotes and other annual report sections.
3
Matrix reporting would have been acceptable under IAS 14R as Autogrill provides full reportable operating segment (primary segments under IAS 14R)
disclosures for three lines of business and additionally for three geographic areas within the food and beverage line of business.
4
Five of the companies are Norwegian: Acergy, Norsk Hydro, Petroleum Geo-Serv, Songa Offshore, and Statoil Asa. Three are German: E.ON, Fresenius
SE, and SAP.
Following adoption of IFRS 8, for most companies, the reportable segments in the footnotes continue to be consistent
with other sections of the annual report with only 12 companies (3%) providing inconsistent disclosures. Four of the six
single segment companies exhibiting inconsistencies under IAS 14R continue to report in an inconsistent manner under
IFRS 8.
A few of our sample companies reporting inconsistent information under IAS 14R changed their disclosures in the first
year of IFRS 8 adoption to yield consistent disclosures. One company changed its Management Report disclosures and three
changed their segment footnote disclosures to achieve consistency. For example, in 2008, KBC Group’s segment footnote
includes reportable segment information for three line of business segments (Banking, Insurance, and European private bank-
ing). The Management Report discusses four mixed segments (Belgium; Central and Eastern Europe and Russia business unit;
Merchant banking and European private banking). Following adoption of IFRS 8, KBC’s segment footnote provides reportable
segment information for the same four business units discussed in the 2008 and 2009 Management Reports (see Appendix B).
In summary, under IAS 14R, most European blue chips had already achieved consistency between their primary segments
and other sections of the annual report. Hence, the IASB’s expectation of increased consistency upon adoption of IFRS 8 did
not materialize. It is, however, important to note that Nichols and Street (2002) identify several companies reporting primary
segments on a basis inconsistent with the introductory section of the annual report (13%) and MD&A (11%) in their study
of the first year of IAS 14R adoption. In contrast, we identify considerably lower levels of inconsistency in both the last year
of IAS 14R use and the first year of IFRS 8 adoption. This decline in inconsistent reporting may be attributed to improved
compliance with IFRS disclosures and/or the greater scrutiny that blue chip companies are subject to from auditors and
regulators.
6.3. Types of reportable operating segments under IFRS 8
6.3.1. Single segment companies

In 2009 (the first year IFRS 8 was mandatory), 21 (6%)5 of the 335 European blue chips in our sample report as a single
segment (see Table 3). Our review of these companies’ annual reports suggests most are appropriately classified as single
segment.
Reporting as a single segment company, Wartsila discloses net sales for three products (Ship power, Power plants, and
Services). The 2009 segment footnote explains why the company does not provide segment disclosures specifically stating
that the Group President assesses the business as a whole, the Group is highly integrated, and that any segmented information
would be of limited value to the user. While a detailed discussion of each of Wartsila’s three products is included in the
Management Report, the only financial information provided is for net sales; this treatment is consistent with the company’s
segment reporting.
Two single segment companies, William Demant and Kone, do not provide segment information by product in their
footnotes but include some product information in the Management Report. William Demant provides net revenue for three
products (Hearing aids, Diagnostic instruments and Personal communication) in the Management Report. However, the only
segment information disclosed in the footnotes is entity-wide geographic information. The 2009 policy footnote states,
Based on the internal reporting model used by Management for the assessment of results and the use of resources, we
have identified one operating segment, the development, manufacture and sale of products and equipment designed to
facilitate people’s hearing and communication, which complies with our approach to the organisation and management
of activities.
In its 2009 policy footnote, Kone attempts to justify reporting as a single entity. The company argues that it provides
services throughout the lifecycle of the equipment since most of the sales are converted to long-term maintenance contracts.
However, within its annual report Kone includes sales by product (Services and New equipment) and market area (EMEA
(Europe, Mid-East, and Africa), Americas, and Asia Pacific).
6.3.2. Multiple reportable operating segments

As shown in Table 3, 64 (19%) of our sample companies determine operating segments based primarily on geographic
location (includes mixed and matrix versions of geographic segmentation). Most companies, 250 (75%), determine operating
segments based primarily on lines of business (includes mixed and matrix versions of line of business segmentation). Twenty-
one line of business companies and 15 geographic companies report using a matrix format. Eight primarily line of business
and eight primarily geographic companies report mixed operating segments (i.e. a combination of line of business and
geographic location); as noted previously, IAS 14R did not allow mixed primary segments. Table 3 provides the breakdown
of reportable segment type by country and by industry.
Previously, we discussed the matrix reporting of Autogrill. Electrolux provides another illustration of matrix reporting
which is allowed under both IAS 14R and IFRS 8. In 2008 while reporting under IAS 14R, Electrolux’s segment footnote states,
5
These include: Intercell, Groupe Bruxelles Lambert, Telenet Group, H Lundbeck, William Dement, Kone, Wartsila, Atlantia, Azimut Holding, Enel Green
Power, Tod’s, ASML, Bankinter, AstraZeneca, Red Electrica Group, Dragon Oil, RyanAir, Golden Ocean, Prosafe, Songa Offshore and UCB.
Table 3
Types of IFRS 8 operating segments reported by European blue chip companies (in the year of IFRS adoption). The italicized columns are totals of the prior columns and are ultimately added together for the total
column.
Pure line of Matrix line Mixed line All line of Pure Matrix Mixed All Single Total
business of business of business business geographic geographic geographic geographic segment
All Continental European blue chips 221 21 8 250 41 15 8 64 21 335

67% 6% 2% 75% 12% 5% 2% 19% 6% 100%
By country/index
Austria 15 15 4 4 1 20
Belgium 8 1 9 5 2 7 3 19
Denmark 14 14 2 1 3 2 19
Finland 19 1 20 1 1 2 23
France 28 2 30 4 4 1 9 0 39
Germany 23 2 1 26 1 3 4 0 30
Ireland 12 2 1 15 0 2 1 3 2 20
Italy 26 2 28 4 2 1 7 4 39
Luxembourg 2 2 4 1 1 2 0 6
Netherlands 13 2 15 5 1 6 1 22
Norway 9 4 0 13 6 0 0 6 3 22
Spain 22 3 25 3 2 5 2 32
Sweden 17 4 1 22 3 2 5 1 28
Switzerland 13 1 14 2 2 0 16
By industry
Agricultural 3 3 1 1 0 4
Mining 13 1 14 4 4 3 21
Construction 15 15 0 1 16
Manufacturing 93 9 3 105 15 4 2 21 9 135
Transportation 8 8 0 2 10
Communications 10 2 1 13 4 4 8 1 22
Electric, gas & sanitary services 6 2 1 9 2 3 2 7 2 18
Wholesale Trade 5 5 1 1 0 6
Retail Trade 7 7 2 1 3 0 10
Finance, Insurance, and Real Estate 52 7 2 61 7 4 1 12 3 76
Services 9 1 10 5 2 7 0 17
89
Table 4
European blue chip companies. Changing reportable operating segment type when adopting IFRS 8.
Panel A: From IAS 14R single segment to IFRS 8 multiple segments
IFRS 8 pure line of business IFRS 8 line of business matrix
From IAS 14R Single Segment to 3 1

Colorplast Gas Natural
Amadeus IT Holding
Criteria CaixaCorp
Panel B: From IAS 14R line of business or geographic to IFRS 8 mixed segments
IFRS 8 mixed line of business IFRS 8 mixed geographic
From IAS 14R line of business to 2 2

RTL group RWE
SSAB Paddy Power
From IAS 14R geographic to 0 2
Carrefour
Italcementi
One company (UCB) changed from reporting multiple geographic segments under IAS 14R to reporting as a single segment under IFRS 8.
For companies reporting pure line of business primary segments under IAS 14R, changes under IFRS 8 reportable segments in the year of adoption are
based on: five pure geographic, eight matrix line of business, eight matrix geographic, two mixed line of business, and two mixed geographic.
For companies reporting pure geographic primary segments under IAS 14R, changes under IFRS 8 reportable segments in the year of adoption are based
on: seven pure line of business, one matrix line of business, four matrix geographic, two mixed geographic and one single segment.
“The segment reporting is divided into primary and secondary segments, where the five business areas6 serve as primary
segments and geographical areas as secondary segments.” Under the heading “Primary reporting format – business areas”
Electrolux’s footnote states,
The Group has operations in appliances, floor-care products and professional operations in food-service equipment
and laundry equipment. The operations are classified in five business segments. Products for the consumer-durables
market, i.e., appliances and floor-care products, are reported in four geographical segments: Europe; North America;
Latin America and Asia/Pacific, while professional products are reported separately.
Electrolux’s 2009 description of the company’s segment reporting more clearly illustrates its matrix format:
The Group has five reportable segments. Products for the consumer-durables market, i.e., appliances and floor-care
products, have four reportable segments: Europe; North America; Latin America and Asia/Pacific. Products within
appliances comprise mainly of refrigerators, freezers, cookers, dryers, washing machines, dishwashers, room air-
conditioners and microwave ovens. Professional products have one reportable segment.
Matrix reporting is very useful. In both 2008 and 2009, Electrolux provides full primary/reportable segment data for not
only its two lines of business (Consumer-durables and Professional markets) but also for four geographic regions within the
Consumer-durables primary segment. Fig. 1 illustrates Electrolux’s matrix format.
In a policy footnote regarding adoption of IFRS 8, the company states, “Electrolux did not change the reporting of operating
segments as a consequence of the standard and the main impact was additional disclosures, e.g., sales per country.”
In 2008 and 2009, the introductory annual report material and segment reporting are consistent. In its 2009 segment
footnote, Electrolux states that its five reportable segments are regularly reviewed by the President and CEO, the Group’s
CODM. Under the IFRS 8 management approach, detailed information is provided for all five segments. Under IAS 14R,
Electrolux could have alternatively reported detailed primary segment data for only the company’s two lines of business.
Upon adopting IFRS 8, several European blue chips changed their operating segment type. The most notable changes (i.e.
to or from single segments and from line of business or geographic primary to mixed) are summarized in Table 4. As noted
previously, IAS 14R requires companies with a mixed management structure to select either line of business or geographic
regions as the basis of primary segments. The reporting of mixed operating segments is, however, now allowed under IFRS
8.
RWE provides another illustration of a change to reporting under the now allowed mixed segment structure. In 2008,
RWE reports five primary segments under IAS 14R based on line of business; the primary segments in the footnotes are
consistent with other sections of the annual report. In 2009, RWE changes to a mixed management structure. Reflective of
its new structure, RWE reports eight IFRS 8 segments based on a mix of regional markets, product lines within the regional
markets, and separate business units (see Appendix B). This mix of geographic and line of business segments is consistent
with other sections of the 2009 annual report. RWE’s 2009 mixed reporting would not have been allowed under IAS 14R.
6
Emphasis added. The ‘five business areas’ represent two lines of business. A matrix is used to provide information for four geographic areas within one
of the lines of business.
6.4. Has IFRS 8 increased the number of segments reported?
6.4.1. Has the number of companies claiming to operate in a single segment declined?
When issuing IFRS 8, the IASB expected an increase in the number of reportable segments. Hence, it is important to
determine if fewer companies report as a single segment under IFRS 8. In their last year of IAS 14R reporting, 23 sample
companies report as single segments. In the year of IFRS 8 adoption, 197 of the 23 continue to report as single segments, and
as reported in Table 4, four move to reporting multiple segments. Three of the four moving to reporting multiple segments
disclose information for pure line of business segments (Colorplast, Amadeus IT Holding, and Criteria Caixa Corp). The
remaining company (Gas Natural) reports using a matrix (based primarily on line of business). When adopting IFRS 8, only
one company (UCB) moves from reporting multiple segments to reporting as a single segment. In summary, the number of
companies previously reporting as a single segment under IAS 14R drops slightly from 23 to 20 under IFRS 8.8
Criteria Caixa Corp illustrates the move from single segment to multiple segment reporting. A 2008 footnote defines the
company as engaged in the acquisition, sale and management of investments in other companies and indicates that the com-
pany’s internal management is not based on business segments. An executive summary in the 2008 annual report provides
an overview of the company’s holding portfolio by Services, Insurance and specialized financial services and International
banking. The three areas are consistent with an organization chart provided in the annual report.
In 2009, Criteria Caixa’s segment footnote indicates that adoption of IFRS 8 requires the company to report segment
information in the same manner as it is provided to management. Accordingly, the company discloses information for
four reportable line of business segments (see Appendix B). The executive summary introducing the 2009 annual report is
consistent with 2008 introductory material. The 2009 annual report discusses two business lines: Financial sector (including
International banking) and Services. The organization chart includes Services – listed companies, Insurance, Services – non-
listed companies, International banking and Specialized financial services as business segments. In 2009, Criteria Caixa also
discloses geographic information at the entity-wide level.
Chr. Hansen Group (not tabulated)9 does not include a segment footnote in its statements for the year ended August 31,
2009. A footnote discussing new IFRSs states,
IFRS 8 “Operating Segments” which was issued by the IASB and adopted by the EU in 2007. Disclosure of operating
segments is only required for listed entities. The Standard will for that reason not have any effect on the Group’s
annual report.
On June 3, 2010, Chr. Hansen re-listed on NASDAQ OMX Copenhagen after five years of private ownership. Accordingly,
when adopting IFRS 8 for the year ended August 31, 2010, the accounting policies footnote states,
IFRS 8 “Operating Segments” according to which information regarding segments is requested on the basis of the
management’s review. Implementation of the standard implies that in future segment information must be given for
the three operating segments. The implementation of the standard has led to further specifications in the notes, but
no changes in recognition and measurement.
The 2009/2010 IFRS 8 footnote reports on three operating segments (see Appendix B). The company explains that the
segments are based on the internal financial information received by senior management. The IFRS 8 operating segments are
consistent with the introductory material and organization charts provided in the 2008/2009 and 2009/2010 annual reports.
At the entity-wide level under IFRS 8, Chr. Hansen discloses revenue and non-current asset information for five geographic
regions.
As noted above, only one sample company previously reporting on multiple segments moves to reporting as a single
segment under IFRS 8. In 2008, UCB provides IAS 14R disclosures for three primary geographic segments (see Appendix B).
Addressing second tier reporting, UCB indicates that the Group operates in one business – Biopharmaceuticals. Both the
company’s 2008 financial and operating review and its accounting policy footnote state that when the company adopts IFRS
8 in 2009 it will present one operating segment, biopharmaceuticals.
UCB’s 2009 segment footnote provides support for reporting one operating segment. It states that the CODM reviews
operating results and operating plans and makes resource allocation decisions on a company-wide basis. Under IFRS 8, UCB
reports on major customers and provides additional entity-wide data for net sales by product (11 drugs and other) and net
sales and assets for eight geographic areas (see Appendix B). The 2009 segment footnote is in line with the Management
Report where matrix reporting is used to disclose product sales by geographic region.
This later finding is highly relevant as it provides evidence that in part refutes concerns that adoption of IFRS 8 will
result in a loss of geographic segment disclosures. First, only one company in our sample of European blue chips moves
7
These include: Intercell, Groupe Bruxelles Lambert, Telenet Group, H Lundbeck, William Dement, Kone, Wartsila, Atlantia, Azimut Holding, Enel Green
Power, Tod’s, Bankinter, ASML, AstraZeneca, Red Electrica Group, Dragon Oil, RyanAir, Golden Ocean and Prosafe report as single segment companies during
both their last year of reporting under IAS 14R and their first year of reporting under IFRS 8.
8
Songa also reports as a single segment under IFRS 8. Before adopting IFRS 8, the company reported under U.S. GAAP and SFAS 131.
9
Chr Hansen Group is not included in Table 3 because the company was not listed the year preceding IFRS 8 adoption. IAS 14R is not applicable for
non-listed companies.
Table 5
Impact of IFRS 8 adoption on European blue chip companies. A comparison of the number of primary segments disclosed during the last year of IAS 14R
reporting and the number of reportable operating segments disclosed during the first year of IFRS 8 reporting.
No change Increase Decrease Number of Average number of Average number of Average

companies in primary segments reportable increase
sub-sample (n) IAS 14R (mean) segments IFRS 8 significant at
(mean)
All companies 201 88a 37b 326 3.84 4.19 p = .0001c

62% 27% 11% 100%
By country/index
Austria 16 4 0 20 3.20 3.50
Belgium 9 6 4 19 4.00 4.50
Denmark 15 2 1 18 2.83 2.89
Finland 13 6 4 23 3.43 3.48
France 19 17 3 39 4.31 5.00
Germany 14 10 3 27 4.26 4.70
Ireland 12 8 0 20 2.75 3.75
Italy 24 11 4 39 4.15 4.54
Luxembourg 3 2 1 6 3.67 4.33
Netherlands 15 5 2 22 3.77 4.00
Norway 13 4 0 17 4.18 4.59
Spain 17 9 6 32 3.72 4.09
Sweden 19 4 5 28 4.29 4.29
Switzerland 12 0 4 16 4.19 3.94
a
For the 88 companies with an increase in the number of segments, the increase on average (mean) is 1.90 segments.
b
For the 37 companies with a decrease in the number of segments, the decrease on average (mean) is 1.51 segments.
c
A t-test (t = 9.36) indicates the mean increase from the last year of reporting under IAS 14R to the first year of reporting under IFRS 8 is significant at
p = 0.0001. Excluding the pre-adoption single segment companies (n = 303), the average number of reportable segments increases from 4.06 under IAS 14R
to 4.40 under IFRS 8. A t-test (t = 8.78) again indicates the increase is significant at p = 0.0001.
from reporting on geographic operating segments to reporting as a single segment. Furthermore, the decision usefulness
of UCB’s IAS 14R geographic segment disclosures is questionable given the broad groupings (North America, Europe and
Rest of World (including Japan and Emerging Markets)). In contrast, the entity-wide geographic disclosures provided under
IFRS 8 are based on finer groupings (including six individual European countries) and hence are likely more decision useful,
especially in light of the matrix reporting provided in the Management Report.
Furthermore, only seven sample companies move from pure geographic primary segments under IAS 14R to pure line
of business reportable segments under IFRS 8. Of these, one provides identical information (the same geographic areas and
the same items of geographic information disclosed) under both IAS 14R and IFRS 8 (Erste). For the other six companies,
the number of items of geographic information disclosed decreases with the change from primary segment information to
entity-wide information. One of the six companies decreases the number of geographic areas disclosed from nine countries to
three countries (TeliaSonera), one retains the same geographic areas (Grafton), one increases the number of geographic areas
by including additional regions (Fresenius Medical Care) and three increase the number of geographic areas by including
country specific information (Autogrill, Schneider Electric, and Glanbia). For example, under IAS 14R, Glanbia provides
primary segment information (seven items) for Ireland and International. Under IFRS 8, Glanbia provides revenue and asset
information for Ireland, U.K., Rest of Europe, USA and Other. Again, these findings refute concerns regarding the widespread
loss of geographic information under IFRS 8, and provide additional evidence of an improvement in the fineness of the
geographic disclosures provided by several companies.
6.4.2. Overall increase in the number of reportable operating segments

The IASB’s expectation, as articulated in the IFRS 8 Basis for Conclusions, is that moving to the management approach
will result in an increase in the number of reportable segments. Table 5 summarizes the change in the number of operating
segments reported by European blue chips moving from IAS 14R to IFRS 8. In the year of adoption, the majority of our sample
companies (201; 62%) report the same number of segments. As anticipated by the IASB, over one-quarter (88; 27%) report
more segments. However, 37 (11%) report fewer operating segments. The only country/index with a decline, on average, in
reportable segments is Switzerland (4.19 to 3.94).
On average, the number of operating segments reported under IFRS 8 increases from 3.84 to 4.19. A one-tail t-test indicates
the increase is statistically significant (p = .0001; t = 9.36). Excluding companies reporting as single segments under IFRS 8
(n = 303), the average number of reportable operating segments increases from 4.06 under IAS 14R to 4.40 under IFRS 8. A
t-test (t = 8.78) again indicates that the increase is statistically significant (p = 0.0001).
Prysmian illustrates an increase in segments. In 2008, Prysmian reports two primary segments: Energy cables and systems
and Telecom cables and systems. In 2009, the company reports on five operating segments. A 2009 footnote explains,
The criteria used for identifying reportable segments are consistent with the way in which management runs the
Group. In particular, the information is structured in the same way as the report periodically reviewed by the Board of
Directors for the purposes of managing the business. The Board of Directors reviews operating performance by macro
type of business (Energy and Telecom) and, in the case of the Energy segment, by sales channel (Utilities, Trade &
Installers, Industrial).
Thus, disaggregation of the Energy segment by sales channel explains the increase in reportable segments (see Appendix
B). In the 2009 annual report, the Directors’ Report is consistent with five operating segments. The same disaggregation of
Energy appears in the 2008 Directors’ Report.
In its first year of IFRS 8 adoption, RTL Group also reports on more segments. In 2008, RTL reports on three primary seg-
ments. The Directors’ Report discusses revenue and EBITA results for the three segments. Additionally, the Report discusses
revenue and EBITA for 10 profit centers and reviews the performance of each center in detail. In 2009, under IFRS 8, RTL
reports on seven mixed segments (see Appendix B). A 2009 footnote explains,
The Group has 16 profit centres, each one led by a CEO managing the operations in television, radio and diversification
businesses in one of the 11 countries where the Group owns interests in 45 channels and 30 stations; Fremantle-
Media and UFA Sports operate an international network in the content business. All the reported segments meet the
quantitative thresholds required by IFRS 8.
The 2009 Directors’ Report is consistent with the segment footnote and provides a detailed performance assessment for
each of the seven mixed segments. Again, a move to matrix reporting enables users to better see the RTL group through the
eyes of management.
In 2008 under IAS 14R, Allianz reports on five primary line of business segments that where appropriate, were subse-
quently organized by geographic area. A 2009 footnote explains the move to reporting on 11 segments (matrix format)
under IFRS 8. The 2009 matrix format results in Allianz reporting five operating segments in the Property-Casualty line of
business and five segments in the Life/Health line of business (see Appendix B). Asset management is the 11th reportable
segment. In the 2009 annual report (p. 60), Allianz presents its segment and business division structure; the organization
chart is consistent with the 2009 IFRS 8 disclosures. In 2008, the Management Report is also consistent with the IAS 14R
primary segments.
While Allianz’s IFRS 8 reporting appears more consistent with the way the company is managed and more decision useful,
it is important to note that the same reporting was appropriate under IAS 14R. Although mixed segments are prohibited under
IAS 14R, matrix reporting is in compliance with IAS 14R as primary segment data for Allianz would have been provided for
each line of business. While the geographic split of the Property-Casualty and Life/Health line of business primary segments
is not required by IAS 14R, the additional disclosures would likely have better enabled users to see the company through
the eyes of management.
Our review suggests some companies may have interpreted matrix reporting as mixed and accordingly unacceptable
under IAS 14R. It is also plausible that a few companies utilized the IAS 14R requirement that companies report primary
segments based on either line of business or geography to limit their segments disclosures.
6.5. Information reported for primary/reportable segments under IAS 14R and IFRS 8 – Sales and Profitability
For our sample companies (excluding single segment), Table 6 summarizes the specific items of primary segment
data disclosed during the last year of applying IAS 14R and the items of reportable operating segment data dis-
closed during the first year of applying IFRS 8. Including multiple measures of segment profitability, a total of 2673
items are disclosed under IAS 14R (average of 8.79 items) and a total of 2572 items are disclosed under IFRS 8
(average of 8.38 items). The decrease is significant (t = 1.82, p = 0.035). Hence, at the reportable segment level, our
findings do not support the IASB’s expectation that IFRS 8 will result in the disclosure of more items of segment
information.
Following IFRS 8 adoption, as required by the standard, all multi-segment companies in our sample disclose at least one
measure of profitability and sales/revenues from external customers. Unlike IAS 14R, IFRS 8 does not define the measure of
reportable segment profitability to be disclosed. As summarized in Table 7 (Panel A), 236 of 314 companies (75%) disclose
one measure of segment profitability while two measures are disclosed by 58 (19%) companies and three measures are
disclosed by 20 (6%) companies. In the year prior to adopting IFRS 8, 250 companies (82% of 303) report one measure of
segment profitability, 41 companies (14%) report two measures and 12 companies (4%) report three measures. The increase
in the number of companies reporting more than one measure of segment profitability is significant (t = 2.38, p = 0.017).
This finding supports the IASB’s expectation that under IFRS 8, companies will report more information regarding segment
profitability.
Most of the segment profitability measures disclosed are non-IFRS measures. Of these, the most common are: operating
profit (segment result or operating income – 180; 57%), EBIT (earnings before interest and tax – 73; 23%), EBT (earnings before
tax – 56; 18%), and EBITDA (earnings before interest, tax, depreciation, and amortization – 50; 16%). Only 53 companies (17%)
disclose a segment profitability measure defined by IFRS – net income. This finding is relevant, as some commentators on
ED 8 as well as the EU have expressed concerns regarding the reporting of non-IFRS segment profitability measures. In
comparison, in their last year of reporting under IAS 14R, 57% disclose operating profit, 19% EBIT, 20% EBT, 8% EBITDA
and 16% net income. It is important to highlight that under IAS 14R operating profit is defined; this is not the case under
IFRS 8.
94
Table 6
Number of European blue chip companies disclosing specific items of primary/reportable segment information. Based on last year of IAS 14R reporting and first year of IFRS 8 reporting (excludes single segment
companies).
Item disclosed IAS 14R IFRS 8
Number of companies Percentage of Number of companies Percentage of
disclosing companies disclosing companies
n = 303a n = 306b
Items required under IAS 14R and IFRS 8

Profitability measurec 303 100% 306 100%
Segment assets (under IFRS 8, if regularly provided to chief operating decision maker) 291 96% 284 93%
Segment liabilities (under IFRS 8, if regularly provided to chief operating decision maker)d 264 87% 216 71%
Profit/loss information required under IFRS 8 if certain conditions mete
Revenue from external customers (also IAS 14R) 303 100% 306 100%
Revenues from transactions with other operating segments of the same entity (also IAS 14R) 169 56% 165 54%
Interest revenue 64 21% 69 23%
Interest expense 34 11% 43 14%
Depreciation/amortization (also IAS 14R) 257 85% 263 86%
Equity method income (also IAS 14R)d 125 41% 92 30%
Income tax expense/benefit 49 16% 62 20%
Material non-cash items other than depreciation and amortization (impairment) (also IAS 14R) 173 57% 170 56%
Balance sheet information required under IFRS 8 if certain conditions metf
Equity method investmentd 125 41% 92 30%
Additions to non-current assets (capital expenditures required under IAS 14R)d 244 81% 223 73%
Voluntary disclosures
Additional income statement detail 90 30% 86 28%
Additional balance sheet detail 55 18% 44 14%
Cash flow information 32 11% 29 9%
R&D expense 11 4% 9 3%
Restructuring expense 11 4% 10 3%
Exceptional items 8 3% 5 2%
a
335 – 8 U.S. GAAP companies prior to adopting IFRS 8 – 1 company not listed prior to adopting IFRS 8 – 23 single segment IAS 14R companies.
b
335 – 8 U.S. GAAP companies prior to adopting IFRS 8 – 1 company not listed prior to adopting IFRS 8 – 20 single segment IFRS 8 companies.
c
See Table 6 for more detailed information on the specific items disclosed and reconciliation to the consolidated income statement.
d
The disclosure of segment liabilities (t = 5.09, p = 0.0001), equity method income and equity method investment (t = 2.90, p = 0.004), and capital expenditures (t = 2.22, p = 0.03) decline significantly in the first
year of IFRS 8 adoption.
e
Profit/loss information is required under IFRS 8 if it is included in the measure of segment profit/loss reviewed by chief operating decision maker, or otherwise regularly provided to the chief operating
decision maker, even if not included in that measure of segment profit/loss.
f
Balance sheet information is required under IFRS 8 if it is included in the measure of segment assets reviewed by chief operating decision maker, or otherwise regularly provided to the chief operating decision
maker, even if not included in that measure of segment assets.
Table 7
Reportable operating segment disclosures under IFRS 8 and reconciliation to consolidated financial statements. Profitability measures, total assets and total
liabilities.
Panel A: Profitability measure One Two Three

Number of profitability measures reported by each company (n = 314)a 236 (75%) 58 (19%) 20 (6%)
Specific profitability measures disclosedb Non-IFRS measure IFRS measure
Operating profit EBIT EBT EBITDA Net income
a. Number of companies disclosing 180 (57%) 73 (23%) 56 (18%) 50 (16%) 53 (17%)

b. Segment profitability measure same as 169 68 55 33 53
an item on the consolidated income
statement
c. Segment profitability measure does not 11 5 1 17 0
agree to a line item on consolidated
income statement/(a–b)c
d. Segment profitability measure 10 4 0 17 0
reconciled in footnote to consolidated
income statement/(if amount did not
agree in c)
Panel B: Total assets Assets disclosed Assets disclosed Assets not Assets not Total
reconciled to total not reconciled disclosed footnote disclosed no
assets comment comment
Number of companies 238 49d 13e 14 314
Panel C: Total liabilities Liabilities disclosed Liabilities disclosed Liabilities not Liabilities not Total
reconciled to total not reconciled disclosed footnote disclosed no
liabilities comment comment
Number of companies 173 45f 22g 74 314

a
335–21 IFRS 8 single segment companies.
b
Operating profit includes segment result and operating income; EBITDA: earnings before interest, taxes, depreciation and amortization; EBIT: earnings
before interest and taxes; EBT: earnings before taxes.
c
The 34 non-IFRS profitability measures not appearing on the consolidated income statement are reported by 30 companies. Of the 30, 15 report a
second profitability measure that is also reported on the consolidated income statement. Of the remaining 15, 13 provide a separate reconciliation of the
segment profitability measure to a measure reported on the consolidated income statement (e.g., EBIT, EBT or net income). Two companies do not reconcile
any of their segment profitability measure(s) to the consolidated income statement: Linde (operating profit and EBIT) and Banca Monte Dei Paschi (EBT).
d
Of the 49 companies disclosing assets that do not reconcile to total assets on the consolidated balance sheet: 12 include a footnote describing the assets
included in the disclosed amount, 29 report specific assets rather than total assets, three provide average total assets, and five do not comment.
e
Thirteen companies that do not disclose a segment asset measure comment that segment assets are not reviewed by management.
f
Of the 45 companies disclosing segment liabilities that do not reconcile to total liabilities on the consolidated balance sheet: nine describe the liabilities
included in the segment measure, 24 report specific liabilities rather than total liabilities, six disclose liabilities and equity combined, and six do not
comment.
g
A statement is made along the line of liabilities are “not allocated” or “not reported” by segment, “debt is managed centrally,” etc.
6.6. Reconciliation of segment profitability measure to the consolidated income statement
As noted above, some commentators to ED 8 express concern that, unlike IAS 14R, the new standard does not spec-
ify/define a measure of profitability; they believe that as a result comparability is diminished. The IASB believes the required
reconciliation to the consolidated income statement addresses this concern. As shown in Table 7, most of the non-IFRS
segment profitability measures tie directly to a number reported on the consolidated income statement (Panel A, item b).
Most of the remaining non-IFRS segment profitability disclosures are, as required by IFRS 8, reconciled to the consolidated
income statement (Panel A, item c). Only two sample companies do not reconcile their measure(s) of segment profitability
to the consolidated income statement: Linde (operating profit and EBIT) and Banca Monte Dei Paschi (EBT).
6.7. Information reported for primary/reportable segments under IAS 14R and IFRS 8 – Segment assets and liabilities – and
reconciliation to consolidated amounts
As noted previously, some commentators to ED 8 express concern that reportable segment disclosures will decline,
most notably segment liabilities. As shown in Table 6, a comparison of reporting under IAS 14R and IFRS 8 confirms this
expectation. Since these disclosures are now required only if regularly reported to the CODM, IFRS 8 results in a slight
decline in disclosure of segment assets (96–93%) and a significant decline in disclosure of segment liabilities (87–71%;
t = 5.09, p = 0.0001). Disclosure of equity method income and equity method investment (41–30%; t = 2.90, p = 0.004) as well
as capital expenditures (81–73%; t = 2.22, p = 0.03) also decline significantly.
Table 7 summarizes the reconciliation (or absence thereof) of segment assets (Panel B) and liabilities (Panel C) to the
consolidated balance sheet. Of the 287 companies (238 + 49) providing a segment asset measure, 49 do not provide a
reconciliation to the balance sheet. Of the 314 multi-segment companies, 218 (173 + 45) disclose a measure of segment
liabilities, yet 45 of these do not reconcile the segment measure to the consolidated balance sheet. Only 13 of the companies
that do not disclose a segment asset measure specifically comment that assets are not reviewed by management at the
segment level. Twenty-two of the companies not disclosing segment liabilities specifically comment that liabilities are not
reviewed by management. For example, Schneider Electric states,
. . . performance assessments are notably based on Earnings Before Interest, Taxes, Amortisation of purchase account-
ing intangibles and Restructuring costs (EBITAR) . . . The Management Board does not review assets and liabilities by
Business.
6.8. Information reported for primary/reportable segments under IAS 14R and IFRS 8 – Voluntary Disclosures
As reported in Table 6, during their first year of IFRS 8 reporting, several sample companies provide voluntary reportable
segment disclosures. For example, 86 (28%) report on additional income statement items, and 44 (14%) provide information
on additional balance sheet items such as multiple measures of segment assets.
Despite user claims that the information is relevant, only nine (3%) disclose research and development (R&D) information
by reportable segment.10 This disclosure represents a slight decline from 11 (4%) during their last year of reporting under IAS
14R. An AICPA 1994 Special Committee Report and AIMR 1993 position paper argue in favor of disclosing R&D by segment,
and prior to issuing SFAS 131, the FASB (1996) noted that disclosure of R&D provides users with information about the
operating segments in which a company is focusing product development. However, neither SFAS 131 nor IAS 14R requires
disclosure of R&D; the same holds for IFRS 8. Since a considerable number of the companies comprising our sample are in
the manufacturing industry (see Table 1), more companies would be expected to disclose R&D by reportable segment to
provide relevant information to users.
IAS 7, Cash Flow Statements, encourages disclosure of segment cash flow information noting that this information is
relevant to understanding the enterprise’s overall financial position, liquidity, and cash flows (IASC, 1997, (50(d)). The
findings of Street and Stanga (1989) support this position. However, in the first year of IFRS 8 adoption, only 29 (9%)11
sample companies voluntarily disclose segment cash flow data. This number represents a slight decline from the 32 (11%)
reporting segment cash flow data during their last year of IAS 14R reporting.
To illustrate, Ackermans & van Haaren provides extensive voluntary reportable segment information under IFRS 8. The
2009 reportable segments are based on lines of business (see Appendix B). For each segment, the company provides a
detailed income statement, balance sheet and cash flow statement presenting the same categories and detail found in the
consolidated statements. Thus, each major category of required reportable segment information is further disaggregated.
For example, other operating income is separated into four sub-classifications. Operating expenses are separated into eight
sub-classifications. In line with the recommendations of IAS 7, Ackermans & van Haaren’s segment cash flow statement
provides information disaggregated into operating, investing, and financing activities.
GN Store Nord also provides extensive voluntary reportable segment disclosure. For each reportable segment (GN Netcom
and GN ReSound), the company provides a complete income statement, a detailed balance sheet (with 11 asset and six liability
classifications) and cash flow from operating and investing activities. GN Store Nord also provides a reconciliation of expensed
development costs detailing incurred development costs, capitalized development costs, and amortization and depreciation.
6.9. Entity-wide disclosures under IFRS 8 compared to IAS 14R second tier disclosures
IFRS 8 requires entity-wide segment disclosures about products and services, geographic areas and major customers, even
if the company reports as a single operating segment. Entity-wide disclosures are not required to be reported separately if
the information is already included in the reportable segment disclosures. Table 8 indicates that entity-wide geographic,
product/services, and major customer disclosures are provided by 257 (77%), 56 (17%), and 19 (6%) of the 335 sample compa-
nies, respectively. In the year of IFRS 8 adoption for those companies reporting on line of business based primary/reportable
segments, on average, the number of geographic areas reported on as second tier/entity-wide data increases significantly
from 4.68 (IAS 14R) to 5.35 (IFRS 8) (t = 2.19, p = 0.014, not tabulated). This finding refutes concerns that IFRS 8 will result in
a loss of geographic segment information.
Under IAS 14R, for companies reporting line of business primary segments, geographic second tier disclosures are required
for sales/revenues, assets, and capital additions/expenditures. IFRS 8 drops the capital expenditures requirement of IAS 14R.
The impact is illustrated in Table 9, which provides a comparison of disclosures provided by sample companies during
their last year of IAS 14R reporting and their first year of IFRS 8 reporting. While the percentage of companies reporting
10
These include: four German companies (BASF, Bayer, Beiersdorf and Fresenius Medical Care), one Dutch company (DSM), one French company (Euro
Aeronautic Defence), two Swiss companies (Lonza and Roche Holdings) and one Swedish company (Volvo).
11
These include seven German companies (Bayer, Beiersdorf, E.ON, Fresenius Medical Care, K&S, Merck, and Siemens), five Swedish companies (Electrolux,
Scania, Securitas, Skanska, and SSAB), four French companies (Bouygues, Cie de Saint-Gobain, Renault, and Veolia Environment), three Spanish companies
(Abengoa, Endeda, and Obrascon), three Belgium companies (Ackermans & van Haaren, Fortis, and Solvay), three Danish companies (AP Moller, GN Store,
and NKT Holdings), two Italian companies (Exor and Mediaset), one Finnish company (Orion) and one Swiss company (Holcim).
Table 8
European blue chip companies providing entity wide segment disclosures in year of IFRS 8 adoption.
Product Geographic Major customer Total companies in

disclosures disclosures disclosures sample/subsample
All companies 56 (17%) 257 (77%) 19 (6%) 335

By type of reportable operating segment
Line of business 26 (12%) 202 (91%) 11 (5%) 221
Geographic 12 (29%) 7 (17%) 3 (7%) 41
Matrix or Mixed 12 (23%) 36 (69%) 0 (0%) 52
Single segment 6a (29%) 12 (57%) 5 (24%) 21
a
See for example Telenet. Although the company operates in a single line of business segment and one geographic area, at the entity-wide level, Telenet
discloses revenues for six products.
Table 9
European blue chip companies disclosing specific items of entity-wide geographic information. Comparison of disclosures under last year of applying IAS
14R and first year of applying IFRS 8.
Item disclosed: IAS 14R IFRS 8
Number of Percentage of companies Number of Percentage of companies

companies n = 326a companies n = 326
Required under both IAS 14R and IFRS 8

Sales/revenue 243 75% 250 77%
Assets 221 68% 220 67%
Item required only under IAS 14R
Capital additionsb 154 47% 42 13%
Voluntary disclosures
Profitability measure 40 12% 18 6%
Liabilities 24 7% 9 3%
Specific asset(s) 12 4% 4 1%
Detailed income statement items 12 4% 6 2%
Depreciation 12 4% 6 2%
Research and development 2 1% 2 1%
Other 16 5% 4 1%
Under IAS 14R, 20 companies report line of business (products) as secondary segment information in the year prior to adopting IFRS 8. Of these, in the first
year of IFRS 8 adoption, two no longer report product information; five report only sales information; two change to line of business reportable segments;
five change to matrix reporting; and six provide the same items of product information as they did under IAS 14R.
a
335 – 8 U.S. GAAP companies prior to adopting IFRS 8 – 1 company not listed prior to adopting IFRS 8.
b
The disclosure of capital additions (t = 10.30, p = 0.0001) declined significantly in the first year of IFRS 8 adoption.
geographic sales/revenues, assets, and various voluntary disclosures remains relatively comparable, disclosure of capital
expenditures drops significantly (t = 10.30, p = 0.0001) from 154 (47%) to 42 (13%). This finding is relevant since it supports
the position of commentators on ED 8, as well as the EU, that the adoption of IFRS 8 will yield a decline in geographic segment
disclosures.
A new feature of IFRS 8 is the requirement to provide entity-wide geographic disclosures for the country of domicile
and for any individually material countries. The effect is shown in Table 10 (Panel A), which compares the types of geo-
graphic groupings utilized by sample companies during their last year of reporting under IAS 14R and their first year of
reporting under IFRS 8. The number of companies utilizing only the broad, vague groupings for which IAS 14 and IAS 14R
were criticized drops significantly (t = 2.12, p = .035) from 41 (17%) to 25 (10%). This decline is attributable primarily to sev-
eral companies moving to country specific disclosures at least for the country of domicile. Companies reporting country
specific disclosures increases from 32 (13%) to 44 (18%), and companies reporting a mix of country specific disclosures and
regions increases from 59 (25%) to 69 (29%). An overall test of improved fineness via an increase in country specific dis-
closures is significant (t = 2.05, p = 0.04). Examples of the geographic groupings used for this analysis appear in Panel B of
Table 10.
Since opponents of IFRS 8 have expressed concern regarding the potential loss of geographic data following its adoption, it
is important to note that in their first year of IFRS 8 adoption nine companies with reportable segments based on geographic
regions disclose additional geographic entity-wide disclosures. For example, Bekaert provides disclosures for four reportable
geographic segments under IFRS 8 (see Appendix B). For each reportable segment, the company reports 17 separate items.12
12
The items disclosed include net sales; operating result before non-recurring items; non-recurring items; EBIT; depreciation and amortization; impair-
ment losses; EBITDA; segment assets; segment liabilities; capital employed; average capital employed; return on average capital; capital expenditures on
property, plant and equipment; capital expenditures on intangible assets; share in the results of joint ventures and associates; investment in joint ventures
and associates; and employees at year end.
Table 10
Comparison of geographic segment disclosures under IAS 14R and IFRS 8 (includes companies reporting as single segment or line of business primary
segment companies under IAS 14R).
IAS 14R IFRS 8
Panel A: Types of geographic disclosures

None 28 (12%) 28 (12%)
Country of domicile/other 14 (6%) 11 (5%)
Country specific 32 (13%) 44 (18%)
Mix of countries and regions 59 (25%) 69 (29%)
Country of domicile/regions 64 (27%) 61 (26%)
Broad regionsa 41 (17%) 25 (10%)
Total 238 (100%) 238 (100%)
Company Country Examples of geographic segment disclosures
Panel B: Country of domicile/other

Atlantia Italy Italy/Rest of World
Foyer Luxembourg Luxembourg/Rest of Europe
Panel C: Country specific
EAD France France/Germany/U.K./Spain/Other Countries
Abertis Spain Spain/France/U.K./Chile/Others
Panel D: Mix of country specific and regions
OMV Austria Austria/Germany/Romania/Rest of CEE/Rest of Europe/Rest of World
UBS Switzerland Switzerland/U.K./Rest of Europe/USA/Asia Pacific/Rest of World
Panel E: Country of domicile and regions
Accor France France/Other Europe/North America/Latin America & Caribbean/Rest of World
Volkswagen Germany Germany/Other Europe/North America/South America/Asia & Oceania
Panel F: Broad regions
DSV Denmark Europe/North America/Rest of World
Konecranes Finland Europe, Middle East & Africa/Americas/Asia-Pacific
Panel A: n = 238 (244 – 6), see Table 1: single segment companies 21 + line of business operating segment companies 223 = 244. Pre-IFRS 8 adoption U.S.
GAAP companies: single segment 1 + line of business 5 = 6.
a
The number of companies using broad, vague groupings declined significantly in the first year of IFRS 8 adoption (t = 2.12, p = 0.35).
Bekaert also provides entity-wide geographic disclosures (revenues and non-current assets) for the country of domicile and
two material countries.13 In 2008 under IAS 14R Bekaert reports on three primary lines of business segments. Second tier
information (net sales, total assets and capital expenditures) is provided for four broad geographic regions (i.e. the 2009
operating segments); no individual country specific information is provided. Thus, for Bekaert, adoption of IFRS 8 results in
more, not less, geographic information. Furthermore, the country specific entity-wide data provided under IFRS 8 is likely
more decision relevant to financial statement users than the broad geographic groupings provided as second tier data under
IAS 14R.
As shown in Table 8, 19 (6%) of the sample companies report on major customers. For example, the Roche Group (2009)
discloses that,
The US national wholesale distributor, AmerisourceBergen Corp., represented approximately 6 billion Swiss francs
(2008: 6 billion Swiss francs) of the Group’s revenues. Approximately 82% of these revenues were in the Pharmaceu-
ticals operating segment, with the residual in the Diagnostics segment. The Group also reported substantial revenues
from the US national wholesale distributors.
Several additional sample companies mention major customers simply noting that, while the company has significant
customers, it does not receive revenue from a single external customer equaling 10% or more of total revenue (e.g., UCB).
6.10. Disclosure of the identity of the CODM
Based on preliminary reviews of IFRS 8 disclosures, some regulators caution companies on specific aspects of their
disclosures. Addressing the findings of the NZ Securities Commission, Ng (2010) highlights the importance of identifying
the CODM. Ng posits that when the CODM is identified as the Board of Directors, it should be normally an executive board
responsible for operating and resource allocation decisions. If the Board is identified as the CODM and the directors are
non-executive and responsible for strategy rather than for making operating decisions, the company may receive questions
from the NZ Securities Commission.
13
See also Schaeller-Bleckmon, Hennes & Mauritz, Holcim, Schibsted, Subsea 7, Synthes, Unilever and Vestas Wind Systems.
Of our 335 sample companies, 120 (36%) disclose the identity of the CODM(s) in the segment footnotes. The specified
identities include the Board of Directors, a high-level management group (e.g., executive committee, management board,
executive board, executive management team, etc.), and an individual (Chief Executive Officer, president, general manager).
Nine (3%) sample companies specify only the Board of Directors as the CODM.14 Most of these provide explanations in
line with Ng’s recommendations. For example, Cargotec indicates the company’s CODM, “is the Board of Directors, who
makes the strategic decisions. The Board of Directors is responsible for allocating and assessing performance of operating
segments.” Dragon Oil, a single segment company, states,
The Group is managed as a single business unit and the financial performance is reported in the internal reporting
provided to the Chief Operating Decision-maker (“CODM”). The Board of Directors (“BOD”), who is responsible for
allocating resources and assessing performance of the operating segments, has been identified as the CODM that
makes strategic decisions.
Another example (e.g. Prysmian) of identifying the Board of Directors as the CODM and explaining the rationale thereof
is provided in Section 6.4.2.
7. Summary and conclusions
In 2006, IFRS 8 was issued amid concerns regarding adoption of what the Economic and Monetary Affairs Committee of
the European Parliament labeled the ‘alien’ U.S. management approach. The IASB responded in part by agreeing to a post-
implementation review. In 2008, the impetus for a review of IFRS 8 gained momentum when the IFRS Foundation Trustees
amended the IASB’s Due Process Handbook to, inter alia, formalize the process of conducting post-implementation reviews
of major projects. Presently, the IASB is conducting a post-implementation review of IFRS 8. Thus, the findings of our review
of the segment disclosures of European blue chips during their last year of IAS 14R reporting and first year of IFRS 8 reporting
are policy relevant as they may inform the post-implementation review.
Our study addresses how convergence with the North American management approach changed segment reporting in
Europe. Our research questions focus on the anticipated benefits articulated by the IASB in the Basis for Conclusions for IFRS
8. Our research questions also consider concerns expressed by regulators including the European Commission.
Our study provides several findings relevant to the assessment of IFRS 8 by the IASB. Under IFRS 8, on average, companies
report significantly more operating segments. However, the majority of European blue chips report the same number or
fewer segments. We also find a significant decrease in the average number of items of reportable segment information
disclosed. While the largest decline is for segment liabilities, equity method income, equity method investment and capital
expenditures also decline significantly.
We find a significant increase in companies reporting more than one measure of segment profitability. While most of the
profitability measures reported are non-IFRS measures, the majority tie directly to a number reported on the consolidated
income statement. Almost all the remaining non-IFRS segment profitability disclosures are, as required by IFRS 8, reconciled
to the consolidated income statement.
While we do not identify an improvement in consistency of reportable segment disclosures with other sections of the
annual report under IFRS 8, this is due to the high level of consistency previously achieved under IAS 14R (e.g. 97% versus
96%).
Refuting critics’ claims regarding the potential loss of geographic segment data under IFRS 8, we find a significant improve-
ment in the fineness of geographic groupings disclosed at the entity-wide level. Specifically, the number of companies
utilizing only the broad, vague groupings for which IAS 14R was criticized drops significantly; the decline is primarily
attributable to providing country specific disclosures at least for the country of domicile. For companies reporting line of
business reportable segments under IFRS 8, on average, the number of geographic areas reported on as entity-wide data
increases significantly. We identify only one company moving from reporting multiple geographic segments under IAS 14R
to reporting as a single segment under IFRS 8. Furthermore, an argument can be made that the IFRS 8 entity-wide geographic
disclosures for this company are more decision useful than the information based on the broad, vague groupings reported on
as IAS 14R operating segments. While the percent of European blue chips reporting entity-wide geographic revenues, assets,
and various voluntary disclosures remains relatively comparable, disclosure of capital expenditures drops significantly.
A limitation of our study is that we examine the segment disclosures of European blue chips. These companies are subject
to substantial regulatory scrutiny and audited by the world’s largest international firms. As such our findings may not be
generalizable to smaller European companies and companies in other regions of the world. Accordingly, future research is
needed to examine the application of IFRS 8 by smaller European companies and companies applying IFRS in other regions of
the world. Future research is also needed to address the application of IFRS 8 beyond its first year of adoption and to expand
the vast body of academic research on the application of the SFAS 131 management approach to non-North American
samples.
14
These include Grafton, Dragon Oil, Swisscom, Abertis, Prysmian, Metso Corp, Kone, TDC, and Cargotec.
Appendix A. European Blue Chip sample companies by country stock index
Austria (ATX) Neste Oil Fresenius Medical Care Snam Rete Gas Bankinter
Andritz Nokian Tyres Fresenius SE Telecom Italia BBVA
Austrian Post Nordea Heidelberg Cement Tenaris BME
CA Immoblien Invest Orion Henkel Terna Criteria Caixa
Conwert Immoblien Invest Outokumpu Oyj Infeon Technologies Tod’s Ebro Foods
Erste Outotec Oyi K&S UBI Banca Enagas
EVN Pohjala Bank Linde UniCredito Italiano Endeda
Immofinanz Rautaruuki MAN Luxembourg (LUXX) FCC
Intercell Sampo Merck Arcelor Mittal Ferrovial
OMV Sanoma Metro Dexia Gamesa
Raiffeisen International Stora Enso Munich Re Foyer Gas Natural
RHI TeliaSonera RWE KBC Group Grifols
Schaeller-Bleckmon Tieto Enator SAP RTL Group Iberdrola
Semperit UPM Siemens SES Iberdrola Renovables
Strabag SE Wartsila ThyssenKrupp Netherlands (AEX) Inditex Group
Telekom Austria France (CAC 40) Volkswagen AEGON Indra
Verbund Accor Ireland (ISEQ 20) Ahold Mapfre Mutualidad
Vienna Insurance Group Air Liquide Allied Irish Banks Air France KLM Obrascon Huarte Lain
Voestalpine Alcatel-Lucent Aryzta Akzonobel Red Electrica Group
Weinerberger Alstom Bank of Ireland ASML Repsol
Zumtobel AXA C&C Group Boskalis Sacyr Vallehermoso
Belgium (BEL 20) BNP Paribas CRH Corio Tecnicas Reunidas
Ackermans Bouygues DCC DSM Telefonica
Anheuser-Busch CapGemini Dragon Oil Fugro Sweden (OMSX 30)
Befimmo-Sicafi Carrefour Elan Heineken ABB
Belgacom Credit Agricole FBD Holdings ING Group Alfa Laval
Cofinimmo Electricite de France Glanbia Philips ASSA ABLOY
Colruyt Essilor Grafton Randstad Holding Astra Zeneca
Delhaize Group Euro Aeronautic Defence Greencore Reed Elsevier Atlas Copco
Dexia FR Vallourec Independent News Royal KPN Boliden
Fortis France Telecom Irish Life SBM Offsore Electrolux
Groupe Bruxelles Lambert Gaz de France Kerry Group Shell Ericsson
KBC Bank Group Danone Kingspan Group TNT Getinge
Mobistar Lafarge Paddy Power TomTom Handelsbanken
Nat Porte Deville L’Oreal Ryanair Unibail Hennes & Mauritz investor
NV Bekaert LVMH Smurfit Kappa Unilever Lundin Petroleum
Omega Pharma Michelin United Drug Wolters Kluwer Modern Times Group
Solvay Natixis Italy (MIB 30) Norway (OBX) Nokia
Telenet Group Pernod-Ricard A2A Acergy Nordea
UCB Peugeot Ansaldo STS Aker Solutions Notes Grop
Umicore PPR Assicurazioni General DNB Nor Sandvik
Denmark (OMXC 20) Publicis Groupe Atlantia DNO International SCA
AP Moller Renault Autogrill Fred Olsen Energy Scania
Carlsberg Saint-Gobain Azimut Holding Golden Ocean SEB
Chr Hansen Holding Sanofi-Aventis Banca Intesa Marine Harvest Securitas
Coloplast Schneider Electric Banca Monte Dei Paschi Norsk Hydro Skanska
Danske Bank Societe Generale Banca Popolare di Milano Norweigian Property SSAB
DS Norden STMicroelectronics Banco Popolare Societa Orkla Swedbank
DSV Suez Environment Bulgari Petroleum Geo-Serv Swedish Match
FL Smiath Technip Buzzi Unicem Prosafe Tele 2
GN Store Total Campari Group Renewable Energy Volvo
H Lundbeck Unibail-Rodamco DiaSorin Schibsted Switzerland (SMI)
NKT Holding Veolia Environment Enel Sevan Marine Credit Suisse
Novo Nordisk Vinci Enel Green Power Songa Offshore Holcim
Novozymes Vivendi ENI Statoil Julius Baer Group
Sydbank Germany (DAX 30) Exor Storebrand Lonza
TDC Adidas Fiat Subsea 7 Nestle
Topdanmarks Allianz Finmeccanica Telenor Novartis Group
TrygVesta BASF Fondiaria-Sai TGS Nopec Geophysic Richemont
Vestas Wind Systems Bayer Impregilo Yara International Roche Holding
William Demant Beiersdorf Italcementi Spain (IBEX 35) SGS
Finland (OMXH 25) BMW Lottomatica Abengoa Swatch Group
Cargotec Commerzbank Luxottica Abertis Swiss com
Elisa Group Daimler Chrysler Mediaset Acciona Swiss Reinsurance
Fortum Deutsche Bank Mediobanca Acerinox Syngenta
Kemeria Deutsche Boerse Mediolanum ACS Synthes
Kesko Deutsche Lufthansa Parmalat Amadeus IT Holding UBS
Kone Deutsche Post Pirelli Banco Popular Zurich Financial Services
Koneranes Deutsche TeleKom Prysmian Banco Sabadell
Metso E.ON Saipem Banco Santander
Appendix B. Segment reporting under IFRS 8 and IAS 14R for a selection of sample companies
Company Standard (year) Reportable segments (IFRS 8) Entity-wide disclosures (IFRS 8)

Segment type Primary segments (IAS 14R) Secondary segments (IAS 14R)
TeliaSonera IFRS 8 (2007) Mobility services Products:

Mixed Line of business Broadband services Mobile communications
Integrated enterprise services Fixed communications
Eurasia Other
Other Geographic:
Sweden Finland
Norway All other countries
IAS 14R (2006) Sweden Spain Products:
Geographic Finland Eurasia Mobile communications
Norway Turkey Fixed communications
Denmark Russia Other
Baltic countries Other
Autogrill IFRS 8 (2008) Food & beverage–Italy Matrix: Three products (Food & beverage, Travel retail &
duty-free and In-flight) each split into geographic regions:
Matrix Line of business Food & beverage–HMS Host Italy Spain
Food & beverage – Other USA and Canada Other Europe
Travel retail & duty-free United Kingdom Other world
In-flight
IAS 14R (2007) Italy Products:
Geographic US and Canada Motorways Shopping centres
Rest of Europe Airports In-flight
Aldeasa (mostly Spain) Railway stations Others
Alpha (mainly U.K.)
KBC Group IFRS 8 (2009) Belgium business unit Geographic:

Mixed Line of business CEER business unit Belgium
Merchant banking business unit Central & Eastern Europe and Russia
European private banking business unit Rest of the world
IAS 14R (2008) Banking Geographic:
Line of business Insurance Belgium
European private banking Eastern Europe and Russia
Rest of World
RWE IFRS 8 (2009) Germany power generation Geographic:

Mixed Line of business Germany sales & distribution networks Germany Rest of Europe
Netherlands/Belgium UK Other
UK Other EU
Central & Eastern Europe
Renewables
Upstream gas & oil
Trading/Gas mid-stream
IAS 14R (2008) Power Energy Geographic:
Line of business Dea Npower Germany Rest of Europe
Supply and trading UK America
Other EU Other
101
102
Appendix B (Continued )
Criteria Caixa Corp IFRS 8 (2009) Insurance Geographic:

Line of business Specialized financial service Spain
Banking Other
Listed utilities
IAS 14R (2008) Single segment None
Chr Hansen Group IFRS 8 (2009) Cultures and enzymes Geographic:

Line of business Health and nutrition Denmark Middle East & Africa
Colors and blends Rest of Europe North America
Asia Pacific South America
IAS 14R (2008) Disclosure not required since company was privately held
UCB IFRS 8 (2009) Single segment: Biopharmaceuticals Products: 11 drugs & other
Single Geographic:
North America Spain
Germany UK and Ireland
France Belgium
Italy Rest of world
IAS 14R (2008) North America None
Geographic Europe
Rest of World
Prysmian IFRS 8 (2009) Energy Geographic:

Matrix Line of business Utilities EMEA other Latin America
Trade and installers EMEA Italy Asia Pacific
Industrial North America
Other
Telecom
IFRS 14R (2008) Energy cables and systems Geographic:
Line of business Telecom cables and systems EMEA Latin America
North America Asia Pacific
RTL Group IFRS 8 (2009) Mediengruppe RTL Deutschland Geographic:

Mixed Groupe M6 Germany
Line of business FremantleMedia France
TRL Nederland U.K.
Five Group Netherlands
RTL Belgium Other regions
French radio
Other segments
IAS 14R (2008) Television Geographic:
Line of business Content Germany
Radio France
Other operations Netherlands
UK Other regions
Allianz IFRS 8 (2009) Property-casualty business: Matrix economic sectors by country:
Matrix Line of business German speaking countries Germany
Europe I including South America Corporate customers
Europe II including Africa Wholesale and retail trade
Anglo broker markets/Global lines Financial institutions (excluding banks) and insurance companies
Service providers
Growth Markets Other
Life-health business: Public authorities
German speaking countries Private customers
Europe I including South America Other
Europe II including Africa Corporate customers
Anglo broker markets/Global lines Wholesale and retail trade and service providers
Growth Markets Financial institutions (excluding banks) and insurance companies
Asset management Other
Public authorities
Private customers
IAS 14R (2008) Property-casualty Matrix reporting within line of business segments
Line of business Life-health Property-casualty by geographic regions:
Banking Europe
Asset Management Germany UK
Corporate Italy Spain
France Switzerland
Western and Southern Europe
New Europe
NAFTA South America
Asia Pacific Other
Property-casualty by product
Allianz global corporate and specialty
Credit insurance
Travel Insurance and Assistance Services
Life-health by geographic regions:
Europe
German life France
German health Switzerland
Italy Spain
Western and Southern Europe
New Europe
NAFTA South America
Asia Pacific Other
Banking by geographic regions:
Germany France
Italy New Europe
Ackermans & van Haaren IFRS 8 (2009) Contracting, dredging & concessions Geographic:
Line of business Real estate and related services EU member states
Financial services Other European countries
Private equity Rest of the world
Energy & materials
103
104
Appendix B (Continued )
IAS 14R (2008) Contracting, dredging & concessions Geographic:

Line of business Real estate and related services EU member states
Financial services Other European countries
Private equity Rest of the world
Bekaert IFRS 8 (2009) EMEA Product:

Geographic North America Steel wire products
Latin America Stainless products
Asia Pacific Coatings & other
Other Geographic:
Belgium China
USA Other Countries
IAS 14R (2008) Advanced wire products Geographic:
Line of business Advanced materials Europe
Advanced coatings North America
Other Latin America
Asia
Other regions
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An Analysis of The Impact of Adopting IFRS 8 On The Segment Disclosures of European Blue Chip Companies

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An Analysis of The Impact of Adopting IFRS 8 On The Segment Disclosures of European Blue Chip Companies

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Journal of International Accounting, Auditing and Taxation 21 (2012) 79–105

Contents lists available at SciVerse ScienceDirect

Journal of International Accounting,

An analysis of the impact of adopting IFRS 8 on the segment

• increases the number of reported segments and provides more information,

• enables users to see an entity through the eyes of management,

2. The road to convergence and IFRS 8

• Revenue (external and inter-segment)

Consumer Durables Professional Products

Europe North Latin Asia/

The Netherlands Germany Belgium Rest of

Consumer Business Getronics Wholesale &

Power Heat Distribution Markets Russia

France Europe Latin America Asia Hard Discount

Fig. 1. Examples of matrix and mixed segment reporting.

3.1. Research on SFAS 131

3.2. Research on IAS 14R

3.3. Preliminary IFRS 8 research and regulatory warnings

• To what extent did companies adopt IFRS 8 early?

5. Sample selection, data collection and sample demographics

6.1. Extent of early adoption (not tabulated)

IAS 14R IFRS 8

312 (96%) 14 (4%) 0 326 312 (96%) 12 (3%) 2 (1%) 326

6.2. Consistency of segment information with introductory annual report

6.3. Types of reportable operating segments under IFRS 8

6.3.1. Single segment companies

6.3.2. Multiple reportable operating segments

All Continental European blue chips 221 21 8 250 41 15 8 64 21 335

Panel A: From IAS 14R single segment to IFRS 8 multiple segments

IFRS 8 pure line of business IFRS 8 line of business matrix

From IAS 14R Single Segment to 3 1

IFRS 8 mixed line of business IFRS 8 mixed geographic

From IAS 14R line of business to 2 2

6.4. Has IFRS 8 increased the number of segments reported?

No change Increase Decrease Number of Average number of Average number of Average

All companies 201 88a 37b 326 3.84 4.19 p = .0001c

6.4.2. Overall increase in the number of reportable operating segments

Item disclosed IAS 14R IFRS 8

Items required under IAS 14R and IFRS 8

Panel A: Proﬁtability measure One Two Three

Speciﬁc proﬁtability measures disclosedb Non-IFRS measure IFRS measure

Operating proﬁt EBIT EBT EBITDA Net income

a. Number of companies disclosing 180 (57%) 73 (23%) 56 (18%) 50 (16%) 53 (17%)

Number of companies 238 49d 13e 14 314

Number of companies 173 45f 22g 74 314

6.6. Reconciliation of segment proﬁtability measure to the consolidated income statement

Product Geographic Major customer Total companies in

All companies 56 (17%) 257 (77%) 19 (6%) 335

Item disclosed: IAS 14R IFRS 8

Number of Percentage of companies Number of Percentage of companies

Required under both IAS 14R and IFRS 8

IAS 14R IFRS 8

Panel A: Types of geographic disclosures

Company Country Examples of geographic segment disclosures

Panel B: Country of domicile/other

6.10. Disclosure of the identity of the CODM

7. Summary and conclusions

Appendix A. European Blue Chip sample companies by country stock index

Company Standard (year) Reportable segments (IFRS 8) Entity-wide disclosures (IFRS 8)

TeliaSonera IFRS 8 (2007) Mobility services Products:

KBC Group IFRS 8 (2009) Belgium business unit Geographic:

RWE IFRS 8 (2009) Germany power generation Geographic:

Criteria Caixa Corp IFRS 8 (2009) Insurance Geographic: