Question

how to discuss each operating segment has contributed to the financial performance and financial position (Under the AASB 8), and what supporting calculations i need to do .I don't need an exact answer, I just want to know how to analyze it, um, could u give me a direction for thinking.

Answer 1

AASB 8 Operating Segments as amended incorporates IFRS 8 Operating Segments as issued and amended by the International Accounting Standards Board (IASB).

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.(i.e All segements of the business)

Applicability:This Standard shall apply to:

(a) the separate or individual financial statements of an entity: (i) whose debt or equity instruments are traded in a public market (a domestic or foreign stock exchange or an over-the-counter market, including local and regional markets), or (ii) that files, or is in the process of filing, its financial statements with a securities commission or other regulatory organisation for the purpose of issuing any class of instruments in a public market; and (b) the consolidated financial statements of a group with a parent: (i) whose debt or equity instruments are traded in a public market (a domestic or foreign stock exchange or an over-the-counter market, including local and regional markets), or (ii) that files, or is in the process of filing, the consolidated financial statements with a securities commission or other regulatory organisation for the purpose of issuing any class of instruments in a public market.

Operating segments

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 and 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. An operating segment may engage in business activities for which it has yet to earn revenues, for example, start-up operations may be operating segments before earning revenues.

Reportable segments

An entity shall report separately information about each operating segment that: (a) has been identified in accordance with Operation of the Company or results from aggregating two or more of those segments and (b) exceeds the quantitative thresholds limts (for Turnover, Profit/Loss, Assets etc) given in AASB. and other situations (e.g. Any segement reported in prior years) in which separate information about an operating segment shall be reported.

Disclosure

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.

a) General Information (factors used to identify the entity’s reportable segments, types of products and services from which each reportable segment derives its revenues etc.)

b) information about reported segment profit or loss, including specified revenues (revenues amount, major external customers, inter-segment transfer etc) and expenses included in reported segment profit or loss, segment assets, segment liabilities and the basis of measurement

c) Reconciliations of the totals of segment revenues, reported segment profit or loss, segment assets, segment liabilities and other material segment items to corresponding entity amounts

d) Other factors (eg. Information about products and services, geographical areas, major customers, the basis of accounting for any transactions between reportable segments, the nature and effect of any asymmetrical allocations to reportable segments etc)

Reconciliations

An entity shall provide reconciliations of all of the following:

(a) the total of the reportable segments’ revenues to the entity’s revenue.

(b) the total of the reportable segments’ measures of profit or loss to the entity’s profit or loss before tax expense (tax income) and discontinued operations. However, if an entity allocates to reportable segments items such as tax expense (tax income), the entity may reconcile the total of the segments’ measures of profit or loss to the entity’s profit or loss after those items.

(c) the total of the reportable segments’ assets to the entity’s assets if the segment assets are reported

(d) the total of the reportable segments’ liabilities to the entity’s liabilities if segment liabilities are reported

(e) the total of the reportable segments’ amounts for every other material item of information disclosed to the corresponding amount for the entity.

In short: An entity shall report all segements which are major contributors of profit or loss, revenues or expenses, total assets and liabilities or any other factor which has material impact/ material activity in decision making for each reportable segment.

Disclaimer: Trying to summarised AASB, if you require any other details, please let me know