An entity shall report ‘a measure’ of profit or loss and total assets and total liabilities for each reportable segment. Importantly a measure of total assets and total liabilities for each reportable segment is required to be reported only if such an amount is regularly reported to the CODM (Chief Operating Decision Maker).
This measure is that which is reported to the CODM for the purposes of making decisions about allocating resources to the segment and assessing its performance. In other words, whatever the CODM uses to measure and assess the operating segment is what is disclosed under IFRS 8. This extends to the allocation of amounts of profit or loss and assets and liabilities to segments. If the CODM uses information based on amounts that are allocated to segments, then those amounts should be allocated for the purposes of disclosing ‘a measure’. If the CODM does not use that information, the amounts should not be allocated. This is in contrast to the prescriptive rules in IAS 14 about allocating amounts to segments.
The requirement to report a measure of profit or loss and segment assets is the only prescribed disclosure in IFRS 8 in respect of statement of profit or loss and other comprehensive income and statement of financial position items. The remainder of para 23 is more discretionary.
In respect of segment profit or loss, certain line items are also required to be disclosed only if these items are included in the measure of segment profit or loss reported to the CODM, or are otherwise regularly provided to the CODM:
(a) revenues from external customers
(b) inter-segment revenues
(c) interest revenue
(d) interest expense
(e) depreciation and amortization
(f) material items of income and expense disclosed in accordance with paragraph 97 of IAS 1
(g) the entity’s interest in the profit or loss of associates and joint ventures accounted for by the equity method
(h) income tax expense or income
(i) material non-cash items other than depreciation and amortization (IFRS 8 para 23).
Interest revenue and interest expense may be reported on a net basis only if a majority of the segment’s revenues are from interest and the CODM relies primarily on net interest revenue to assess the performance of the segment. This may be the case, for example, in the banking industry.
In respect of segment assets, certain line items are also required to be disclosed only if these items are included in the measure of segment assets reported to the CODM, or are otherwise regularly provided to the CODM:
(a) the amount of investment in associates and joint ventures accounted for by the equity method
(b) the amounts of additions to non-current assets (with certain exceptions) (IFRS 8 para 24).
The notable feature of these disclosure requirements is the lack of prescription. If the items listed (with the exception of a measure of segment profit or loss, which must always be disclosed) are reported to the CODM, then they must be disclosed. This means that what is not reported internally is not disclosed externally. Furthermore, how the amount is measured internally is used for external measurement purposes, even if the measurement basis is not in accordance with IFRS.