01 November 2007

IFRS8 Operating Segments

In order to be awarded CPD units you must answer the following five random questions correctly. If you fail the test, please re-read the article before attempting the questions again.

  1. The following statements allegedly refer to the scope of IFRS 8. 1) IFRS 8 only applies to entities whose equity securities are traded in a public market. 2) If an entity to which IFRS 8 does not apply chooses to present information on components of its business then the information must be presented in compliance with IFRS 8 in order for it to be described as segment information. Which of the statements is true?

  2. The following segments allegedly refer to the identifications of operating segments for the purposes of segmental disclosures. 1) An operating segment is a component of an entity whose results are regularly reviewed by the chief operating decision maker in the entity. 2) The chief operating decision maker can be more than one person operating as a group. Which of the statements are true?

  3. The following segments allegedly refer to the separate reporting of information regarding operating segments. 1) An operating segment is only separately reportable if it exceeds quantitative thresholds identified in IFRS 8. 2) If an operating segment that is reportable in the current period was not reportable in the previous period then no comparative information needs to be provided regarding that segment. Which of the statements are true?

  4. An entity has identified the following segments of its business. There are no sales made between the different segments. Segment 4 is the corporate centre and it does not generate any revenue. All of the segments have different economic characteristics. Segment 1 has revenue of 100,000, profit of 12,000 and assets of 50,000. Segment 2 has revenue of 60,000, profit of 8,000 and assets of 25,000. Segment 3 has revenue of 10,000, a loss of 2,500 and assets of 5,000. Segment 4 has assets of 10,000 but no revenue or profit. Which, as a minimum, of the segments are reportable under IFRS 8?

  5. An entity has identified the following business segments: Segment 1 has revenue of 70,000, all external. Its profit is 10,000 and its assets 50,000. Segment 2 has revenue of 35,000, of which 30,000 relates to sales to other segments of the entity. Its profit is 1,000 and is assets 4,500. Segment 3 has revenue of 13,000, all external. Its profit is 1,000 and its assets 5,000. Segment 4 has revenue of 12,500, all external. Its profit is 500 and its assets 3,000. All of the segments have different economic characteristics. Which, as a minimum, of the segments are reportable under IFRS 8?

  6. The following statements allegedly refer to the reporting of the profit or loss of a reportable segment. 1) The amounts reported depend on the way in which financial information about the reportable segment is provided to, and reviewed by, the chief operating decision maker. 2) Wherever allocated to a reportable segment, an entity should report interest revenue and interest expense as separate components of the segment report. Which of the statements are true?

  7. The following statements allegedly refer to the reporting of the assets and liabilities of a reportable segment. 1) An entity should always report a measure of the liabilities of its reportable segments. 2) Where non-current assets are allocated to reportable segments then (subject to certain specified exclusions) the segment report should include additions to non-current assets. Which of the statements are true?

  8. The following statements allegedly refer to the measurement of items included in the segment report. 1) The amount of each segment item reported shall be the measure reported to the chief operating decision maker for the purposes of making decisions about allocating resources to the segment and assessing its performance. 2) Where the chief operating officer uses more than one measure of items included in a segment report for decision making purposes then, for the purposes of the segment report, management should select the one that they believe to be most consistent with the measure used in the entity’s own financial statements. Which of the statements are true?

  9. The following statements allegedly apply to entity-wide disclosures that may be required by IFRS 8. 1) Where an entity to which IFRS 8 applies has a single reportable segment then no disclosures of any kind are required by IFRS 8. 2) Where revenues from transactions with a single external customer amount to 10GBP or more revenues then the entity needs to disclose the name of the customer and the segment or segments reporting the revenues. Which of the statements are true?

  10. The following statements allegedly apply to the effective date from which IFRS 8 becomes operational. 1) For entities outside the European Union, IFRS 8 cannot be adopted until the first accounting period beginning on or after 1 January 2009. 2) Until the European Union adopts IFRS 8, then IAS 14 continues to apply to companies within the European Union. Which of the statements are true?

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