Accounting

When Comparative Information Must Be Restated In Segment Reporting

IFRS 8- Operating Segments is primarily a disclosure standard and is particularly relevant for large organizations that operate in different geographical locations and/or in diverse businesses. Information about an entity’s segments is relevant to assessing the risks and returns of a diversified or multinational entity where often that information cannot be determined from aggregated data.

There are a few circumstances in which comparative information must be restated or otherwise taken into account.

(a) If an operating segment was a reportable segment for the immediately preceding prior period but is not for the current period, and management decides that the segment is of continuing significance, information about that segment must continue to be reported in the current period (Para 7 of IFRS 8).

(b) If an operating segment becomes a reportable segment for the current period, comparative information must be restated to reflect the newly reportable segment, even if that segment did not meet the criteria for reportability in the prior period. This is required unless the information is not available and the cost to develop it would be excessive (IFRS 8 para 18).

(c) If management changes its measure of segment profit or loss, para 27(e) requires disclosure of the nature and effect of that change, as discussed above. The standard does not specify whether comparative information must be restated in this circumstance. However, applying the principles of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors and the general principle apparent in IFRS 8 in respect of consistency of comparative information, one would expect the comparative information to be restated in this circumstance.

(d) If an entity changes the structure of its internal organization in a manner that causes the composition of its reportable segments to change, the corresponding information for prior periods, including interim periods, must be restated. This applies unless the information is not available and the cost to develop it would be excessive. Note that in this case the exemption from restatement applies to each individual item of disclosure. This could result in restatement of some items and not of others.

(e) If an entity changes the structure of its internal organization in a manner that causes the composition of its reportable segments to change and the corresponding information for prior periods is not restated, the entity must disclose the segment information for the current period on both the old and the new basis. This applies unless the information is not available and the cost to develop it would be excessive (IFRS 8 para 30).

(f) On transition to the new standard (i.e. when the entity first applies IFRS 8), comparative information must be restated unless the information is not available and the cost to develop it would be excessive.

Note the repeated use of the phrase ‘unless the information is not available and the cost to develop it would be excessive’ in the above exemptions and other exemptions within the standard. This phrase is consistent with that used in SFAS 131 and differs from the term ‘impracticable’, which was used in IAS 14 and is still used in IAS 1 Presentation of Financial Statements. Arguably the phrase is more precise than ‘impracticable’. It is also notable that IFRS 8 contains more exemptions from disclosure than IAS 14 did. IAS 14 provided an ‘impracticability’ exemption only for restatement of comparative information and on transition, whereas IFRS 8 provides exemptions from the entity-wide disclosures as well as for restatement of comparatives.

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