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Illustration 2
An entity’s household goods division has been identified as a reportable operating segment. The items of financial information regularly provided for review by the chief operating
decision maker and those which should, at a minimum, be disclosed under IFRS 8 are as follows.
Year ended 31 December 2007 CUmillion
Minimum disclosure
Revenues External customers
50 Yes
Internal customer 15
Yes Total
65 No
Raw materials consumed 8
No Change in finished goods inventories
11 No
Employee benefits expense 9
No Depreciationamortisation
2 Yes
Impairment losses 7
Yes Administrative expenses
4 No
Allowance for doubtful receivables 1
No Selling and distribution expenses
12 No
Profitloss 11
Yes Total assets
60 Yes
Additions to non-current assets 8
Yes Carrying amount of non-current assets disposed of
5 No
Note that only the amounts for profitloss and total assets are to be disclosed in all circumstances. All the other items marked for disclosure are specified in IFRS 8.23 and
8.24 as being disclosed only because they are included in the measure of profitloss and the total assets reviewed by the chief operating decision maker.
Impairment losses are disclosed because they are non-cash items other than depreciation amortisation and their amount is deemed to be material.
Where there have been changes in the internal structure of an entity that have led to corresponding changes in the reportable segments, comparative segment information should
be restated to reflect this change where it is practicable to do so. If changes to the internal structure lead to a change in the identification of segments and the comparative segments
have not been restated because it is not practicable to do so, then the old and new segment basis should both be reported for the year in which the change takes place. This is to ensure
that useful comparisons can still take place.
4.5 Additional disclosures
Entities may operate and be managed in a number of different ways which may lead to key information not being reported as part of an entity’s operating segment disclosures. IFRS 8
therefore sets out additional information that is required to be disclosed by all entities, including those that have a single operating segment, that are within its scope. The following
additional information is only required if such information has not been provided already by the entity as part of its reportable segment information:
revenue from external customers for each individual, or group of similar, products and services. This information is not required if it is not readily available and the cost to
provide such information would be excessive, but this fact should be disclosed;
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revenue from external customers and certain non-current asset information attributed to the entity’s country of domicile and those attributed to all foreign countries in total.
This information is not required if it is not readily available and the cost to provide such information would be excessive, but this fact should be disclosed; and
information about an entity’s reliance on major customers. “Reliance on a major customer” is defined as being when 10 or more of an entity’s revenues arise from
transactions with a single customer.
5 Discontinued Operations: IFRS 5 - Presentation and Disclosure
5.1 Discontinued operations
Investors need to evaluate the financial effects of discontinued operations on future operations. IFRS 5 provides information to assist them in doing this.
Disclosure is required when an entity discontinues a component of its activities. Disclosure of a discontinued operation is often made before the component is discontinued i.e. when it is
classified as held for sale.
A component of an entity comprises operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the entity.
A discontinued operation is a component of an entity that either has been disposed of or is classified as held for sale. The component should represent a separate major business line or
geographical area of the entity’s operations. The effective closure of the component should be part of a single plan.
5.2 Disclosure
The objective of the disclosures is to provide users of the financial statements with sufficient information so that they are able to evaluate the financial effect of discontinued operations.
[IFRS 5.30]
The discontinued operation’s profit or loss after tax should be disclosed as a single figure in the statement of comprehensive income. A break down in the statement of comprehensive
income or in the notes to the financial statements should show the revenue, expenses, pre- tax profit or loss, the related income tax expense and the profit or loss on asset disposals.
If an entity presents both an income statement and a statement of comprehensive income in accordance with IAS 1 Presentation of financial statements, as discussed in Chapter 3, the
separate disclosures relating to an entity’s discontinued operations is presented in the income statement.
An entity should also disclose for a discontinued operation the net cash flows attributable to the operating, investing and financing activities of that operation.
5.3 Prior periods
Results in the statement of comprehensive income reported for prior periods should be restated so that they reflect all operations that have been discontinued by the end of the
current year. The assets and liabilities of a discontinued subsidiary in the prior period statement of financial position should not be reclassified as held for sale.
Where adjustments are made to amounts that were presented as part of discontinued operations in a prior period, they should be separately disclosed as part of discontinued
operations in the current period and the nature of such adjustments explained. Adjustments
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may become necessary where there was some element of uncertainty as to, say, the disposal price.
Illustration 3
An entity has classified a subsidiary as held for sale during the current year. A separate subsidiary is a component of the entity, as its operations and cash flows are capable of
being separately identified both operationally and for financial reporting purposes. By being classified as held for sale, it meets all the criteria of a discontinued activity.
The prior period statement of comprehensive income and note disclosures shall be re- presented so that they relate to all operations discontinued by the current year end. But the
assets and liabilities of the subsidiary in the prior period statement of financial position are not reclassified as held for sale.
5.4 Events after the reporting period
Adjustment for events occurring after the end of the reporting period is not permitted by IFRS 5. Where the criteria for discontinuance are satisfied after the end of the reporting
period, the operation cannot be retrospectively classed as a discontinued operation. However, details of the discontinuance should be disclosed in the notes to the financial statements.
6 Chapter Review
This chapter has been concerned with segment reporting and discontinued operations. Key issues relating to IFRS 8 have been the identification of reportable segments and the nature
of the disclosure requirements. Key issues relating to IFRS 5 have been the identification of discontinued activities and the required disclosure and presentation requirements.
This chapter has covered: the objective and scope of IFRS 8;
the nature of segmental reporting; an overview of IFRS 8;
reportable segments and reporting formats; segment disclosure requirements;
identification of discontinued activities; and disclosure and presentation of discontinued activities in accordance with IFRS 5.
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7 Self Test Questions
Chapter 22
1. Are the following statements relating to a discontinued operation true or false,
according to IFRS5 Non-current assets held for sale and discontinued operations?
1 When the discontinued criteria are met after the end of the reporting
period, the operation shall retrospectively be separately presented as a discontinued operation.
2 The net cash flows attributable to the operating, investing, and
financing activities of a discontinued operation shall be separately presented.
Statement 1 Statement 2
A
False False
B False
True
C
True False
D
True True
2. Which ONE of the following is a requirement for a component of an entity to
be classified as a discontinued operation in accordance with IFRS5 Non- current assets held for sale and discontinued operations?
A
Its activities must cease permanently prior to the financial statements being authorised for issue by management
B It must comprise a separately reported segment in accordance with
IFRS8 Operating segments
C Its assets must have been classified as held for sale in the previous
financial statements
D
It must have been a cash-generating unit or a group of cash- generating units while being held for use
3. Are the following statements true or false, according to IFRS8 Operating
segments? 1
If an entity changes the way it is structured internally so that its reportable segments change, the comparative information for earlier
periods must be restated.
2 Disclosure is always required of the total assets of each reportable
segment. Statement 1
Statement 2
A
False False
B False
True
C
True False
D
True True
