The step-by-step IAS 36 impairment approach

When looking at the step-by-step IAS 36 impairment approach it comes down to the following broadly organised steps:

  • What?? – Determining the scope and structure of the impairment review,
  • If and when? – Determining if and when a quantitative impairment test is necessary, jump to this part here
  • How? – Understanding the mechanics of the impairment test and how to recognise or reverse any impairment loss, if necessary, jump to this part here.

The objective of IAS 36 Impairment of assets is to outline the procedures that an entity applies to ensure that its assets’ carrying values are not stated above their recoverable amounts (the amounts to be recovered through use or sale of the assets). To accomplish this … Read more

IFRS 8 Identifying operating segments

IFRS 8 Identifying operating segments – There are four key steps. Entities will need to:

  1. Identify the Chief Operating Decision Maker (CODM) (group/team/individual).
  2. Identify their business activities (which may not necessarily earn revenue or incur expenses).
  3. Determine whether discrete financial information is available for the business activities.
  4. Determine whether that information is regularly reviewed by the CODM.

Identifying the CODM and the components that are regularly reviewed by the CODM to make decisions can be difficult. It is also important to reassess regularly the identification of the CODM, particularly following a business reorganisation, acquisition or disposal. IFRS 8 Identifying operating segments

IFRS 8 defines an operating segment as a ‘component of an entity that engages in business activities from which … Read more

Disclosure of operating segments

Disclosure of operating segments – The disclosures regarding operating segments focus on the information that management believes is important when running the business. The disclosure requirements are summarised below.

Information required

Disclosures

General information

  • Factors used to identify the reportable segments. Disclosure of operating segments
  • Types of product/service from which each reportable segment derives its revenue.

Information about the reportable segment; profit or loss, revenue, expenses, assets, liabilities and the basis of measurement

  • A measure of profit or loss and total assets. Disclosure of operating segments
  • A number of specific disclosures, such as revenues from external customers if they are included in segment profit or loss and presented regularly to the CODM. Disclosure of operating segments
  • Explanation of the measurement
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What are operating segments?

What are operating segments – Most entities will be able to identify their operating segments easily by reference to the definition. However, when this is not the case, for example if the chief operating decision maker (CODM) uses more than one set of segment information, other factors may enable the operating segments to be identified.

Factors to consider in determining operating segments for a reporting entity are: What are operating segments

  • the nature of the business activities of each component of the entity, the existence of managers responsible for them, and information presented to the board of directors.
  • an operating segment will usually have a segment manager who is directly accountable to, and has regular contact with, the CODM to
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Operating segments Matrix structured entities

Operating segments Matrix structured entities – IFRS 8 10 addresses the issue of matrix structures. It uses the example of an entity where some managers are responsible for product and service lines worldwide, whereas other managers are responsible for specific geographical areas. Operating segments Matrix structured entities

The CODM reviews the operating results of both sets of components, and discrete financial information is available for both. In this situation, the entity should determine which set of components constitutes the operating segments, taking account of what users of the financial statements would need to know in order to evaluate the entity’s business activities and the environment it operates in. Operating segments Matrix structured entities

Matrix-structured entities use judgment to determine their … Read more