BASIS FOR CONCLUSIONS ON IFRS 8 ADOPTION

BASIS FOR CONCLUSIONS ON IFRS 8 ADOPTION : IFRS 8 requires an entity whose debt or equity securities are publicly traded to disclose information to enable users of its financial statements to evaluate the nature and financial effects of the different business activities in which it engages and the different economic environments in which it operates.
It specifies how an entity should report information about its operating segments in annual financial statements and in interim financial reports. It also sets out requirements for related disclosures about products and services, geographical areas and major customers.

BASIS FOR CONCLUSIONS ON IFRS 8 ADOPTION : In the Basis for Conclusions on ED 8, the Board noted that the primary benefits of adopting the management approach in SFAS 131 are that:

(a) entities will report segments that correspond to internal management reports;

(b) entities will report segment information that will be more consistent with other parts of their annual reports;

(c) some entities will report more segments; and

          (d) entities will report more segment information in interim financial reports.

In addition, the Board noted that the proposed IFRS would reduce the cost of providing disaggregated information for many entities because it uses segment information that is generated for management’s use.

Most respondents to the Exposure Draft supported the adoption of the  management approach. They considered the management approach appropriate, and superior to the approach of IAS 14. These respondents observed that the management approach for segment reporting allows users to review an entity’s operations from the same perspective as management. They noted that although the IAS 14 approach would enhance comparability by requiring entities to report segment information that is consistent with IFRSs, the disclosures will not necessarily correspond to segment information that is reported to management and is used for making decisions.

BASIS FOR CONCLUSIONS ON IFRS 8 ADOPTION

Yet other respondents agreed with the management approach for the identification of segment assets, but disagreed with the management approach
for the measurement of the various segment disclosures. In particular, they doubted whether the publication of internally reported amounts would
generate significant benefit for investors if those amounts differ from IFRS amounts.

The Board noted that if IFRS amounts could be prepared reliably and on a timely basis for segments identified using the management approach, that approach would provide the most useful information. However, the Board observed that IFRS amounts for segments cannot always be prepared on a sufficiently timely basis for interim reporting.

The Board also noted the requirements in the IFRS for an explanation of the measurements of segment profit or loss and segment assets and for reconciliations of the segment amounts to the amounts recognised in the entity’s financial statements. The Board was satisfied that users would be able to understand and judge appropriately the basis on which the segment amounts were determined.

BASIS FOR CONCLUSIONS ON IFRS 8 ADOPTION

The Board concluded that the advantages of the management approach, in particular the ability of entities to prepare segment information on a sufficiently timely basis for inclusion in interim financial reports, outweighed any disadvantages arising from the potential for segments to be reported in accordance with non-IFRS accounting policies.
Given the Board’s support for the principles of the management approach required by SFAS 131 and the objectives of the short-term convergence project, The Board decided that the simplest and most complete way to achieve convergence would be to use the text of SFAS 131 for the IFRS.

The FASB’s thinking behind the management approach of SFAS 131 is presented in its Background Information and Basis for Conclusions. Because the Board has adopted that approach, the FASB’s Background Information and Basis for Conclusions are reproduced in Appendix A to this Basis for Conclusions.

BASIS FOR CONCLUSIONS ON IFRS 8 ADOPTION : Specific measurement requirements for some item

In ED 8, the Board invited comments on whether the proposed IFRS should depart from the management approach in SFAS 131 by setting measurement

In January 2008 the IASB issued an amended IAS 27 Consolidated and Separate Financial Statements, which amended ‘minority interest’ to ‘non-controlling interests’. The consolidation requirements in IAS 27 were superseded by IFRS 10 Consolidated Financial Statements issued in May 2011. The term ‘non-controlling interests’ and the requirements for non-controlling interests were not changed.

requirements for specified items. Some respondents to ED 8 supported an approach that would define the measurement of the key terms such as segment revenues, segment expenses, segment results, segment assets and segment liabilities in order to enhance comparability between reporting entities. Other respondents disagreed with any departure from SFAS 131 on the grounds that defined measurements for specified items would eliminate the major benefits of the management approach.

The IFRS requires the entity to explain the measurements of segment profit or loss and segment assets and liabilities and to provide reconciliations of the total segment amounts to the amounts recognised in the entity’s financial statements. The Board believes that such reconciliations will enable users to understand and judge the basis on which the segment amounts were determined. The Board also noted that to define the measurement of such amounts would be a departure from the requirements of SFAS 131 that would involve additional time and cost for entities and would be inconsistent with the management perspective on segment information.

BASIS FOR CONCLUSIONS ON IFRS 8 ADOPTION : Therefore, the Board decided not to require defined measures of segment revenues, segment expenses, segment result, segment assets and segment liabilities.

BASIS FOR CONCLUSIONS ON IFRS 8 ADOPTION

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