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BLUE NOTES
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PFRS 8 defines an operating segment as follows. An operating segment is a component of an entity:
 that engages in business activities from which it may earn revenues and incur expenses (including revenues
and expenses relating to transactions with other components of the same entity)
 whose operating results are reviewed regularly by the entity's chief operating decision maker to make
decisions about resources to be allocated to the segment and assess its performance and
 for which discrete financial information is available

Core principle
An entity shall disclose information to enable users of its financial statements to evaluate the nature and financial
effects of the business activities in which it engages and the economic environments in which it operates.

This IFRS shall apply to:

(a) the separate or individual financial statements of an entity:
(i) Whose debt or equity instruments are traded in a public market (a domestic or foreign stock
exchange or an over-the-counter market, including local and regional markets), or
(ii) That files, or is in the process of filing, its financial statements with a securities commission or
other regulatory organization for the purpose of issuing any class of instruments in a public
market; and
(b) the consolidated financial statements of a group with a parent:
(i) Whose debt or equity instruments are traded in a public market (a domestic or foreign stock
exchange or an over-the-counter market, including local and regional markets), or
(ii) That files, or is in the process of filing, the consolidated financial statements with a securities commission or
other regulatory organization for the purpose of issuing any class of instruments in a public market.

Note: When both separate and consolidated financial statements for the parent are presented in a single financial report, segment information
need be presented only on the basis of the consolidated financial statements.

Reportable segments
PFRS 8 requires an entity to report financial and descriptive information about its reportable segments. Reportable
segments are operating segments or aggregations of operating segments that meet specified criteria:
 Its reported revenue, from both external customers and intersegment sales or transfers, is 10% or more of
the combined revenue, internal and external, of all operating segments; or
 The absolute measure of its reported profit or loss is 10% or more of the greater, in absolute amount, of (i)
the combined reported profit of all operating segments that did not report a loss and (ii) the combined
reported loss of all operating segments that reported a loss; or
 Its assets are 10% or more of the combined assets of all operating segments.
Note:
a. If the total external revenue reported by operating segments constitutes less than 75 per cent of the entity's revenue, additional
operating segments must be identified as reportable segments (even if they do not meet the quantitative thresholds set out above)
until at least 75 per cent of the entity's revenue is included in reportable segments.

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Chapter 47 – Operating Segments USL Blue Notes 179

b. There may be practical limit to the number of reportable segments to be disclosed separately by an entity beyond which segment
information may become too detailed and thus lose its usefulness. There is no precise limit, but as the number increases above ten, the
entity shall consider whether a practical limit has been reached.

Single operating segment

Two or more operating segments may be aggregated into a “single operating segment” if the aggregation is
consistent with the core principle of segment reporting, the segments have similar economic characteristics and the
segments are similar in each of the following respects:
a. Nature of product or service
b. Nature of production process
c. Type or class of customers
d. Marketing method or the method used to distribute the product
e. Nature of regulatory environment.

Accordingly, an entity may combine information about operating segments that do not meet the quantitative
thresholds to achieve the “75% of entity external revenue” threshold if the operating segments have similar economic
characteristics and share a majority of the five aggregation criteria.

Reportable segment in the preceding but not in the current period

If management judges that an operating segment identified as a reportable segment in the immediately preceding
period is of continuing significance, information about that segment shall continue to be reported separately in the
current period even if it no longer meets any of the quantitative thresholds for reportability.

Reportable segment in the current period but not in the prior period
If an operating segment is identified a reportable segment in the current period in accordance with the
quantitative thresholds, segment data for a prior period presented for comparative purposes shall be restated to
reflect the newly reportable segment even if that segment did not satisfy any of the quantitative thresholds in the
prior period.
However, prior period segment information shall not be restated if the necessary information is not available and
the cost to develop it would be excessive.
Disclosure requirements
Required disclosures include:
 General information about how the entity identified its operating segments and the types of products and
services from which each operating segment derives its revenues.
 Information about the reported segment profit or loss, including certain specified revenues and expenses
included in segment profit or loss, segment assets and segment liabilities, and the basis of measurement
 Reconciliations of the totals of segment revenues, reported segment profit or loss, segment assets, segment
liabilities and other material items to corresponding items in the entity's financial statements .
 Some entity-wide disclosures that are required even when an entity has only one reportable segment,
including information about each product and service or groups of products and services.
 Analyses of revenues and certain non-current assets by geographical area – with an expanded requirement
to disclose revenues/assets by individual foreign country (if material), irrespective of the identification of
operating segments.
 Information about transactions with major customers.
Note: Considerable segment information is required at interim reporting dates by PAS 34.

Theory of Accounts Practical Accounting 1