Step 1 Identify operating segments

This is the starting point to identify operating segments.

Ultimate goal is that an entity discloses useful 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.

Take a look over here to see a descriptive explanation of an operating segment.

Go to STEP 2.

Continue reading

Can a R&D function be an operating segment?

As long as discrete information is reviewed by the CODM. Typically, an entity’s research and development (R&D) function is a vertically integrated operation (see Operating segments – Vertically integrated operation), in which the R&D activities serve as an integral component of the entity’s business. The definition of operating segment envisages that part of an entity that earns revenue and incurs expenses relating to transactions with other components of the same entity may still qualify as an operating segment even … Continue reading