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IFRS8

This presentation covers IAS 14, IFRS 8, and IAS 24, focusing on segment reporting and related party disclosures. IFRS 8 requires entities to identify operating segments, determine reportable segments based on quantitative thresholds, and disclose relevant financial information. IAS 24 mandates the disclosure of related party transactions to ensure transparency in financial statements.

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2 views20 pages

IFRS8

This presentation covers IAS 14, IFRS 8, and IAS 24, focusing on segment reporting and related party disclosures. IFRS 8 requires entities to identify operating segments, determine reportable segments based on quantitative thresholds, and disclose relevant financial information. IAS 24 mandates the disclosure of related party transactions to ensure transparency in financial statements.

Uploaded by

njobvuedward1
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Group 2

This presentation is
about IAS 14, IFRS 8,
& IAS 24
IFRS 8 APPLICATION
SUMMARY

• Identify the operating segments


• Determine the reportable segments
• Disclose the required information
Operating segment
Is the component of an entity:
From which it may earn revenues and incur
expenses (including intra group revenue and
expenses)
Whose operating results are reviewed regularly by
the entity’s Chief Operating Decision Maker to
assess performance and decide about resource
allocation.
For which discrete financial information is
available
DETERMINING REPORTING
SEGMENTS
AGGREGATION
IFRS 8 says that two or more operating segments can be
aggregated and reported as a single operating segment
provided that they have similiar economic
characteristics, and are similiar in the following respects:
i. Nature of products and services
ii. Nature of the production processes
iii. Customer type or class
iv. Distribution methods
v. Nature of regulatory environment
Quantitative thresholds
an entity must separetely report information about an operating
segment that meets any of the following quantitative thresholds:
• its reported revenue,including both sales to external customers
and inter-segment sales, is10% or more of the combined
revenue of all operating segments
• it reported profit or loss is 10% or more of the greater,in
absolute amount of:
-the combined reported profit of all operating segments that
did not repot a loss.
-the combined reported loss of all operating segments that
reported a loss
• its assets are 10% or more of the combined assests of all
operating segments
• atleast 75% of the entity’s external revenue must be included in
the reportable segments. other segments should be identified as
reportable segments until 75% of the external revenue is
example
the management of a company have identified
operating segments based on geographical location.
information
segment total forexternal
these segments is provided
internal profit assets below:
report
revenue revenue revenue /loss

000 000 000 000 000

europe 260 140 120 98 3400 yes

middle 78 33 45 (26) 345 No


east

Asia 150 150 - 47 995 Yes

north 330 195 135 121 3800 Yes


America

central 85 40 45 (15) 580 No


America

South 97 54 43 12 880 No
America
Required:
• According to IFRS 8, which segment must be
reported.?
• Workings
Total revenue :10% of 1000 = K100.
Total Profit :10% of (98 + 47+ 121+12 ) = K27.8
Total loss : 10% of (15+26) = K4.1
Total Assets: 10% of 10000= 1000.
75% Test: Europe, Asia, North America.
( 140 + 150 + 195) = 485/612
= 79%
Operating segments that do not meet the
quantitative thresholds, may be considered
reportable and separately disclosed:
• If management believes that information about the
segment would be useful to the users of the
financial statements.
• If management judges that an operating segment
identified as a reportable segment in the
immediately preceding period is of continuing
significance
Information about other business activities and
operating segments that are not reportable shall be
combined and disclosed in an ‘all other segments’
category separately form other reconciling items in
the reconciliations.
The sources of the revenue included in the ‘all other
segment’ category shall be described
comparatives
If an operating segment is identified as 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 as a
separate segment, even if that segment did not
satisfy the criteria for reportability in the prior
period, unless the necessary information is not
available and the cost to develop it would be
excessive.
DISCLOSURE
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. Its shall disclose the following for each
period for which a statement of comprehensive
income is presented:
a. General information
b. Information about segment revenues, segment
profit or loss and segment assets and liabilities
and basis of measurement.
c. Reconciliation statement
Disclosure of information about revenues,
profit and loss and assets and liablities

• For each reporting segment, entity shall report:


Segment profit or loss
total segment assets
• Segment liabilities (if reviewed by CODM)
RELATED PARTY TRANSACTION

The objective of IAS 24 is to ensure that an entity’s


financial statements contain the disclosures necessary
to draw attention to the possibility that its financial
position and profit or loss may have been affected by
the existence of related parties and by transactions and
outstanding balances with such parties.
• who is a related party?
A Related party is a person or entity that is related to the
entity that is preparing its financial statements(reporting
entity).
• what is related party transaction?
A related party transaction is a transfer of resources,
services, or obligations between related parties, regardless
of whether a price is charged.
Parties are considered related if the party has;

(i) the ability to control the other party

(ii) the ability to exercise significant influence over the


reporting entity

(iii) joint control over the entity


Examples of related parties:
(i) associates: an entity over which the investor has significant influence.

(ii) venture : joint venture of the other entity

(iii) Both entities are joint ventures of the same third party.

(vi) The entity is a post-employment benefit plan: for the benefit of employees
of either the reporting entity or an entity related to the reporting entity.

(v)The entity is controlled or jointly controlled by a person identified in (a).

(vi) key management personnel of the entity (or of a parent of the entity).

(vii) close family members: such as spouse and children who may be expected
to influence or be influence by that individual in their dealings with the entity .
The following are deemed not to be related:
 Two entities simply because they have a director or key manager
in common,
 two venture's who share joint control over a joint venture,

 providers of finance, trade unions, public utilities, and


departments and agencies of a government in the course of their
normal dealings with an entity by virtue of only those dealings.
 a single customer, supplier, franchiser, distributor, or general
agent with whom an entity transacts a significant volume of
business merely by virtue of the resulting economic dependence
DISCLOSURE
•Relationships between parents and subsidiaries. Regardless of whether there have
been transactions between a parent and a subsidiary, an entity must disclose the name
of its parent and, if different, the ultimate controlling party. If neither the entity’s
parent nor the ultimate controlling party produces financial statements available for
public use, the name of the next most senior parent that does so must also be
disclosed.

•If an entity obtains key management personnel services from a management entity,
the entity is not required to disclose the compensation paid or payable by the
management entity to the management entity’s employees or directors. Instead the
entity discloses the amounts incurred by the entity for the provision of key
management personnel services that are provided by the separate management entity.
•Related party transactions. If there have been transactions between related
parties, disclose the nature of the related party relationship as well as
information about the transactions and outstanding balances necessary for
an understanding of the potential effect of the relationship on the financial
statements. These disclosure would be made separately for each category
of related parties and would include:

•The amount of the transactions the amount of outstanding balances,


including terms and conditions and guarantees provisions for doubtful
debts related to the amount of outstanding balances expense recognized
during the period in respect of bad or doubtful debts due from related
parties
EXAMPLES OF TRANSACTION
DISCLOSURED IF THEY WITH A
RELATED PARTY

 Purchases or sales of goods

 purchases or sales of property and other assets

 rendering or receiving of services

 leases transfers of research and development

 transfers under license agreements

 transfers under finance arrangements (including loans and equity

contributions in cash or in kind) provision of guarantees or


collateral
CONCLUSION
•IAS 14, which focuses on segment reporting, and IFRS 8, which
supersedes IAS 14 and provides more detailed guidance on segment
reporting, are both aimed at providing users of financial statements with
information about the financial performance and position of an entity’s
operating segments. IAS 24 deals with related party disclosures, requiring
entities to disclose information about transactions and relationships with
related parties. In conclusion, while IAS 14 and IFRS 8 are concerned
with segment reporting, IAS 24 focuses on related party disclosures. Each
standard plays a crucial role in enhancing transparency and providing
stakeholders with relevant information for decision making.

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