Question

Preparation of Financial statements under the guidance in IAS 1 Preparation of Financial Statements should be sufficient for most entities. However, there are business companies that are required to prepare reports in a particular format for operating segments, and others that are required to prepare for presentation interim financial statements. The IASB issued IFRS 8 Operating Segments and IAS 34 Interim Financial Statements to provide guidance in relevant financial reporting.

Required:

( a )      Justify the relevance of issuing each of the additional standards for providing financial reporting guidance.                                                                                                                           ( 10 marks)

( b )      Discuss the significance of materiality espoused in the IASB’s Conceptual Framework in the context of integrated reporting (IR) for entities.                                                                     

Answer 1

Question 1

Definitions

IFRS 8 Operating Segments requires particular classes of entities (essentially those with publicly traded securities) to disclose information about their operating segments, products and services, the geographical areas in which they operate, and their major customers. Information is based on internal management reports, both in the identification of operating segments and measurement of disclosed segment information.

IAS 34 Interim Financial Reporting applies when an entity prepares an interim financial report, without mandating when an entity should prepare such a report. Permitting less information to be reported than in annual financial statements (on the basis of providing an update to those financial statements), the standard outlines the recognition, measurement and disclosure requirements for interim reports.

Analysis:

While preparing financial statements many Accounting standards are taken into consideration, IFRS 8 is required because comapnies have to analyse their profit operating segment wise and should know which operating segments are making profit and which are making losses in turn leading to set off of losses and affecting the company's profit or loss.

Interim analysis of staements is required because whatever policies the comapny is making should be reviewed as on half yearly basis to understand the impact on the profit Financial Satements should be analysed on a half yearly basis. Hence this analysis is done.

Question 2:

In Integrated Reporting, a matter is material if it could substantively affect the organization's ability to create value in the short, medium and long term. The process of determining materiality is entity specific and based on industry and other factors, as well as multi-stakeholder perspectives.

The text signifies that an item can affect the organisation in many ways. So to be specific concept of materiality is introduced in intergrated reporting.