|IFRS Converges to U.S. GAAP on Segment Reporting
IFRS 8 on Operating Segments may resemble FAS 131, but it differs in important ways from IAS 14.
As part of the convergence effort between IFRS and U.S. GAAP, the International Accounting Standards Board published IFRS 8, Operating Segments, which became effective Jan 1. IFRS 8 supersedes IAS 14, Segment Reporting, and closely resembles the “through the eyes of management” approach of FASB Statement no. 131, Disclosures about Segments of an Enterprise and Related Information.
IFRS 8 applies to the individual financial statements of an entity and the consolidated financial statements of a group with a parent (a) whose debt or equity instruments are traded in a public market or (b) 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. Reportable segments are operating segments, or aggregations of operating segments, that meet or exceed one of several quantitative thresholds; smaller segments may be optionally disclosed.
Under IAS 14, dual segment classifications were required — by both business and geographic area — with the primary typology determined by the predominant driver of the reporting entity’s risks and returns. Under IFRS 8, operating segments may be defined by product, geography or other attributes — consistent with management’s decision-making processes.
This article has been excerpted from the Journal of Accountancy. Read the full article here.