IFRS 8 - Operating Segments: A Comprehensive Guide to Understanding and Implementing the Standard

Introduction

IFRS 8 - Operating Segments is an International Financial Reporting Standard (IFRS) that provides guidance on how to identify and report operating segments in financial statements. The standard is designed to help investors, creditors, and other users of financial statements understand the different parts of a company's business and how they contribute to the company's overall financial performance.

Key Features of IFRS 8

IFRS 8 introduces several key concepts and requirements for identifying and reporting operating segments, including:

• Operating segment: A component of an entity that engages in business activities from which it may earn revenues and incur expenses, including expenses relating to assets employed in the component.
• Reportable segment: An operating segment that meets certain quantitative thresholds for revenue, profit or loss, or assets.
• Chief operating decision maker (CODM): The person or group of persons who is primarily responsible for the day-to-day operations of the entity and makes decisions about the allocation of resources to the entity's operating segments.

Benefits of IFRS 8

IFRS 8 provides several benefits to investors, creditors, and other users of financial statements, including:

• Improved comparability: IFRS 8 requires companies to use consistent criteria to identify and report operating segments, which makes it easier for users of financial statements to compare the financial performance of different companies.
• Enhanced transparency: IFRS 8 requires companies to disclose more information about their operating segments, including revenue, profit or loss, assets, and liabilities. This information helps users of financial statements to better understand the different parts of a company's business and how they contribute to the company's overall financial performance.
• Better decision-making: IFRS 8 provides users of financial statements with the information they need to make informed decisions about investing in or lending to a company.

Conclusion

IFRS 8 is an important standard that provides guidance on how to identify and report operating segments in financial statements. The standard is designed to help investors, creditors, and other users of financial statements understand the different parts of a company's business and how they contribute to the company's overall financial performance.

About the Author

Nabil Ahmad Mourad is a Certified Public Accountant (CPA) and a Certified Management Accountant (CMA) with over 20 years of experience in the accounting and finance industry. He has held various positions in both public accounting and corporate finance, and he is currently the CFO of a large multinational corporation. Nabil is also a frequent speaker and writer on accounting and finance topics, and he is the author of several books and articles on these topics.