CIA2001

MFRS 8 OPERATING SEGMENTS

SEMESTER 1,
2023/2024
MFRS 8
Core principle
P.1:
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

- applies to both separate and consolidated FS

CRITERIA FOR
IDENTIFYING SEGMENTS
P.5:
An operating segment is a component of an entity:
a) That engages in business activities from which it
may earn revenues and incur expenses (including
revenues & expenses relating to transactions with
other components of the same entity)
b) Whose operating results are regularly reviewed by
the entity’s chief operating decision maker to
make decisions about resources to be allocated to
the segment and assess its performance, and
c) For which discrete financial information is available
 REPORTABLE
SEGMENTS
P.11: An entity shall provide separate information about
each of its reportable segments.
P.12:
Two or more operating segments may be aggregated into
one operating segment if the segments have similar
economic characteristics and are similar in each of the
following respects:
a) The nature of the products and services
b) The nature of the production processes
c) The type or class of customer for their products and services
d) The distribution methods used
e) The nature of the regulatory environment (if any)
P.13: QUANTITATIVE
THRESHOLDS
a) Its reported total revenue from sales to external
customers and sales to other operating segments is
at least 10% of the total revenue ( external and
internal) of all operating segments, or
b) Its reported profit or loss is at least 10% of the
combined profit of all operating segments that
reported a profit or the combined loss of all
operating segments that a reported a loss,
whichever is the greater, or
c) Its assets are at least 10% of the total assets of all
operating segments
 QUANTITATIVE THRESHOLDS

An operating segment that does not meet any of the 10%

thresholds may be treated as a reportable segment if the
management believes that segment information would be
useful to the users. Alternatively:
 Such a segment may be combined into a reportable
segment with one or more similar operating segments
that also fail to meet any of the 10% thresholds, or
 It may be included in an “all other segments” category in
the segment report.
P.15: THE 75% TEST
If the total external revenue attributable to reportable
segments is less than 75% of the entity’s total external
revenue, additional operating segments must be identified as
reportable (though there are beneath the 10% thresholds)
until at least 75% of total external revenue is included in
reportable segments.
Identifying Operating Segments ILLUSTRATION 24.7
Data for Different
Possible Reporting
Segments

The company would apply the respective tests as follows.

Revenue test: 10% x €2,150 = €215; C, D, and E meet this test.

LO 2
Identifying Operating Segments ILLUSTRATION 24.7
Data for Different
Possible Reporting
Segments

The company would apply the respective tests as follows.

Operating profit (loss) test: 10% x €90 = €9

(the test is based on non-loss segments); A, C, D, and E meet this test.
LO 2
Identifying Operating Segments ILLUSTRATION 24.7
Data for Different
Possible Reporting
Segments

The company would apply the respective tests as follows.

Identifiable assets tests: 10% x €970 = €97; C, D, and E meet this test.

LO 2
Identifying Operating Segments ILLUSTRATION 24.7
Data for Different
Possible Reporting
Segments

Reporting segments are therefore A, C, D, and E, assuming that these

four segments have enough sales to meet the 75 percent of combined
sales test.

LO 2
Identifying Operating Segments ILLUSTRATION 24.7
Data for Different
Possible Reporting
Segments

75% of combined sales test: 75% x €2,150 = €1,612.50.

The sales of A, C, D, and E total €2,000 (€100 + €700 + €300 + €900);

therefore, the 75 percent test is met.
LO 2
DISCLOSURES : MFRS 8

P.20-P.34
Disclosure Issues

Accounting principles that companies use for segment

disclosure need not be the same as the principles they use
to prepare the consolidated statements.

The IASB does not require allocations of joint, common, or

company-wide costs solely for external reporting purposes.

Common costs are those incurred for the benefit of more

than one segment and whose interrelated nature prevents a
completely objective division of costs among segments.

LO 2
Disclosure Issues

Segmented Information Reported

IASB requires that an enterprise report the following.
1. General information about operating segments.
2. Segment profit and loss and related information.
3. Segment assets and liabilities.
4. Reconciliations.
5. Information about products and services and
geographic areas.
6. Major customers.
LO 2
Guidance on Implementing MFRS 8 Operating Segment
Week 4 & 5 - Operating Segments & RPD\MFRS 8CR_IG
2021.pdf

NESTLE ANNUAL REPORT

Week 4 & 5 - Operating Segments & RPD\Nestle-group-
2021-restatements.pdf
 MFRS 124 CIA2001
RELATED PARTY SEMESTER 1
DISCLOSURES 2023/2024
 PURPOSE OF RELATED
PARTY DISCLOSURES
P5
Related party relationships are a normal feature of
commerce and business. For example, entities frequently
carry on parts of their activities through subsidiaries, joint
ventures and associates. In those circumstances, the entity
has the ability to affect the financial and operating policies
of the investee through the presence of control, joint control
or significant influence.
P6
A related party relationship could have an effect on the profit
or loss and financial position of an entity. Related parties
may enter into transactions that unrelated parties would not.
For example, an entity that sells goods to its parent at cost
might not sell on those terms to another customer. Also,
transactions between related parties may not be made at
the same amounts as between unrelated parties.
RELATED PARTY?
A related party is a person or an entity that is related to the
entity that is preparing its financial statements.
P. 9(a): A person or a close member of that person’s family
is related to a reporting entity if that person:
i. Has control or joint control over the reporting entity
ii. Has significant influence over the reporting entity
iii. Is a member of the key management personnel of the reporting
entity or of a parent of the reporting entity

P.11- PARTIES THAT ARE NOT NECESSARILY RELATED

 RELATED PARTY?
An entity (W) is related to a reporting entity (Y) if any of the
following conditions applies:
i. W and Y are members of the same group
ii. W is an associate / JV of Y ( or vice versa)
iii. W and Y are both JV of the same third party
iv. W is an associate of a third party and Y is a joint venture of that same
third party ( or vice versa)
v. W is a post employment benefit plan ( a pension scheme) for the
benefit of the employees of Y / for the benefit of the employees of any
entity that is related to Y.
vi. W is controlled or jointly controlled by a person identified in P.9(a).
vii. A person identified in P.9(a) has significant influence over W/ is a
member of the key management personnel of W or of a parent of W.
viii. W provides key management personnel services to the reporting entity
or to its parent.
 EXAMPLE: RELATED
PARTY
(a) Person A owns 30% of Entity B and Entity C owns 40% of Entity B
 Entity B is the reporting entity:
Person A is a related party under definition 9(a)(ii) and
Entity C is a related party under definition (ii)
 Entity C is the reporting entity:
Entity B is a related party under definition (ii)
(b) Person A owns 70% of Entity B and is a director of Entity C
 Entity B is the reporting entity:
Person A is a related party under definition 9(a)(i) and
Entity C is a related party under definition (vii)
 Entity C is the reporting entity:
Person A falls within the definition of Entity C’s key
management personnel and is a related party under definition 9(a)
(iii).
Entity B is a related party under definition (vi)
 PARTIES DEEMED NOT TO BE
RELATED PARTIES
P.11

(a) two entities simply because they have a director or other member
of key management personnel in common or because a member of
key management personnel of one entity has significant influence over
the other entity.
(b) two joint venturers simply because they share joint control of a
joint venture.
(c) (i) providers of finance,(ii) trade unions,(iii) public utilities, and(iv)
departments and agencies of a government that does not control,
jointly control or significantly influence the reporting entity, simply by
virtue of their normal dealings with an entity (even though they may
affect the freedom of action of an entity or participate in its decision-
making process).
(d) a customer, supplier, franchisor, distributor or general agent with
whom an entity transacts a significant volume of business, simply by
virtue of the resulting economic dependence.
RELATED PARTY
TRANSACTION?
Is a transfer of resources, services or obligations
between a reporting entity and a related party,
regardless of whether a price is charged.

Close members of the family of a person:

 Are those family members who may be expected to influence, or be
influenced by, that person in their dealings with the entity and
include: that person’s children & spouse/ domestic partner; children
of that person’s spouse/domestic partner; and dependents of that
person/that person’s spouse/domestic partner.

Key management personnel:

 Are those persons having authority and responsibility for planning,
directing and controlling the activities of the entity, directly or
indirectly, including any director (whether executive or otherwise)
of that entity.
COMPENSATION OF KEY
MANAGEMENT
PERSONNEL
P17: An entity shall disclose key management
personnel compensation in total and for each of the
following categories:
(a) short-term employee benefits;
(b) post-employment benefits;
(c) other long-term benefits;
(d) termination benefits; and
(e) share-based payment.
GOVERNMENT-RELATED ENTITIES

P25
A reporting entity is exempt from the disclosure
requirements of paragraph 18 in relation to related party
transactions and outstanding balances, including
commitments, with:
(a) a government that has control or joint control of, or
significant influence over, the reporting entity; and
(b) another entity that is a related party because the same
government has control or joint control of, or significant
influence over, both the reporting entity and the other
entity.
DISCLOSURES –
MFRS124
P13-P27

ILLUSTRATIVE EXAMPLES
Week 4 & 5 - Operating Segments & RPD\MFRS 124CR_
IE2021.pdf
Disclosure

 IFRS requires the following minimum disclosures of

material related-party transactions:
► Nature of relationship.
► Amount of transaction and outstanding balances.
► Provision for doubtful debts.
► Expense recognized during the period in respect of
bad or doubtful debts due from related parties.

LO 2
DISCUSSION IN CLASS

DISCUSS THE POSSIBLE IMPACTS OF :

1. TRANSACTIONS WITH RELATED PARTIES
2. OPERATING SEGMENTS