Yakub02
Banned
Many companies operate in several different industries (or ‘product markets’) or diversify their operations across several geographical locations.
A consequence of diversification is that companies are exposed to different rates of profitability, different growth prospects and different amounts of risk for each separate ‘segment’ of their operations.
Objective of IFRS 8 IFRS 8 requires quoted companies to disclose information about their different operating segments, in order to allow users of the financial statements to gain a better understanding of the company’s financial position and performance.
Users are able to use the information about the main segments of the company’s operations to carry out ratio analysis, identify trends and make predictions about the future.
Without segment information, good performance in some segments may ‘hide’ very poor performance in another segment, and the user of the financial statements will not see the true position of the company.
Segment reporting is required for any entity whose debt or equity is quoted on a public securities market (stock market) and also entities that are in the process of becoming quoted. If an entity includes some segment information in the annual report that doesn’t comply with IFRS 8, it cannot call it ‘segmental information.’ Operating segments IFRS 8 defines an operating segment as a component of an entity: that engages in business activities from which it earns revenues and incurs.
A consequence of diversification is that companies are exposed to different rates of profitability, different growth prospects and different amounts of risk for each separate ‘segment’ of their operations.
Objective of IFRS 8 IFRS 8 requires quoted companies to disclose information about their different operating segments, in order to allow users of the financial statements to gain a better understanding of the company’s financial position and performance.
Users are able to use the information about the main segments of the company’s operations to carry out ratio analysis, identify trends and make predictions about the future.
Without segment information, good performance in some segments may ‘hide’ very poor performance in another segment, and the user of the financial statements will not see the true position of the company.
Segment reporting is required for any entity whose debt or equity is quoted on a public securities market (stock market) and also entities that are in the process of becoming quoted. If an entity includes some segment information in the annual report that doesn’t comply with IFRS 8, it cannot call it ‘segmental information.’ Operating segments IFRS 8 defines an operating segment as a component of an entity: that engages in business activities from which it earns revenues and incurs.
