Question

subject: company accounting

Discuss the advantages for stakeholders where companies provide segment information in their financial reports under AASB 8 Operating Segments. What are the criticisms of the standard?  

Answer 1

Australian Accounting Standard AASB 8

The Australian Accounting Standards Board made Accounting Standard AASB 8 Operating Segments under section 334 of the Corporations Act 2001 on 7 August 2015. This compiled version of AASB 8 applies to annual periods beginning on or after 1 January 2016

Advantages for stakeholders where companies provide segment information in their financial reports under AASB 8 Operating Segments.

1. First of all it can highlight the specific characteristics about defrent parts of their company in their reports .Because the segment report classify different data into different statements .it compared of a number of small statements

2. The second one is The investors can clearly identify the profitability of an organization ,The risks and returns in the future

3. The third one is it's helps the investors to understand the financial statements and communications of the entity

4. The fourth one is It shows the future risks to the stakeholders so they can take immediate actions to prevent them

criticisms of the standard

The adoption of AASB 8 is associated with an increase in analysts’ ability to forecast earnings. I find that analysts’ earnings forecasts have not improved significantly after adopting AASB 8 in Australia, regardless of whether firms disclosed more disaggregated segment information. Our use of control firms provides assurance that the results are due to AASB 8 and not to some other events concurrent with the adoption of AASB 8. Overall, our results imply that the benefits associated with the management approach as experienced by financial analysts in the United States have not been realised by financial analysts in Australia. This suggests that the successful adoption of an accounting standard in one country should not be the justification for recommending adoption in other countries.