IAS14SegmentReportingrevised1997

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1、IAS 14 Segment Reporting - revised 1997IAS 14 Segment Reporting (revised 1997)?1/24International Accounting Standards IAS 14 Segment Reporting (revised 1997) This revised International Accounting Standard supersedes IAS 14, Reporting Financial Information by Segment, which was approved by the Board

2、in a reformatted version in 1994. The revised Standard became operative for financial statements covering periods beginning on or after 1 July 1998. Paragraphs 116 and 117 of IAS 36, Impairment of Assets, set out certain disclosure requirements for reporting impairment losses by segment. Introductio

3、n This Standard ('IAS 14 (revised)') replaces IAS 14, Reporting Financial Information by Segment ('the original IAS 14'). IAS 14 (revised) is effective for accounting periods beginning on or after 1 July 1998. The major changes from the original IAS 14 are as follows. 1. The orig

4、inal IAS 14 applied to enterprises whose securities are publicly traded and other economically significant entities. IAS 14 (revised) applies to enterprises whose equity or debt securities are publicly traded, including enterprises in the process of issuing equity or debt securities in a public secu

5、rities market, but not to other economically significant entities. 2. The original IAS 14 required that information be reported for industry segments and geographical segments. It provided only general guidance for identifying industry segments and geographical segments. It suggested that internal o

6、rganisational groupings may provide a basis for determining reportable segments, or segment reporting may require reclassification of data. IAS 14 (revised) requires that information be reported for business segments and geographical segments. It provides more detailed guidance than the original IAS

7、 14 for identifying business segments and geographical segments. It requires that an enterprise look to its internal organisational structure and internal reporting system for the purpose of identifying those segments. If internal segments are based neither on groups of related products and services

8、 nor on geography, IAS 14 (revised) requires that an enterprise should look to the next lower level of internal segmentation to identify its reportable segments. 3. The original IAS 14 required that the same quantity of information be reported for both industry segments and geographical segments. IA

9、S 14 (revised) provides that one basis of segmentation is primary and the other is secondary, with considerably less information required to be disclosed for secondary segments. 4. The original IAS 14 was silent on whether segment information must be prepared using the accounting policies adopted fo

10、r the consolidated or enterprise financial statements. IAS 14 (revised) requires that the same accounting policies be followed. 5. The original IAS 14 had allowed differences in the definition of segment result among enterprises. IAS 14 (revised) provides more detailed guidance than the original IAS

11、 14 as to specific items of revenue and expense that should be included in or excluded from segment revenue and segment expense. Accordingly, IAS 14 (revised) provides for a standardised measure of segment result, but only to the extent that items of revenue and operating expense can be directly att

12、ributed or reasonably allocated to segments. 6. IAS 14 (revised) requires ;symmetry; in the inclusion of items in segment result and in segment file:/D:?document?ias?ias_014.htm2002-8-8IAS 14 Segment Reporting (revised 1997)?2/24assets. If, for example, segment result reflects depreciation expense,

13、the depreciable asset must be included in segment assets. The original IAS 14 was silent on this matter. 7. The original IAS 14 was silent on whether segments deemed too small for separate reporting could be combined with other segments or excluded from all reportable segments. IAS 14 (revised) prov

14、ides that small internally reported segments that are not required to be separately reported may be combined with each other if they share a substantial number of the factors that define a business segment or geographical segment, or they may be combined with a similar significant segment for which

15、information is reported internally if certain conditions are met. 8. The original IAS 14 was silent on whether geographical segments should be based on where the enterprise's assets are located (the origin of its sales) or on where its customers are located (the destination of its sales). IAS 1

16、4 (revised) requires that, whichever is the basis of an enterprise's geographical segments, several items of data must be presented on the other basis if significantly different. 9. The original IAS 14 required four principal items of information for both industry segments and geographical segm

17、ents: (a) sales or other operating revenues, distinguishing between revenue derived from customers outside the enterprise and revenue derived from other segments; (b) segment result; (c) segment assets employed; and (d) the basis of inter-segment pricing. For an enterprise's primary basis of se

18、gment reporting (business segments or geographical segments), IAS 14 (revised) requires those same four items of information plus: (a) segment liabilities; (b) cost of property, plant, equipment, and intangible assets acquired during the period; (c) depreciation and amortisation expense; (d) non-cas

19、h expenses other than depreciation and amortisation; and (e) the enterprise's share of the net profit or loss of an associate, joint venture, or other investment accounted for under the equity method if substantially all of the associate's operations are within only that segment, and the a

20、mount of the related investment. For an enterprise's secondary basis of segment reporting, IAS 14 (revised) drops the original IAS 14 requirement for segment result and replaces it with the cost of property, plant, equipment, and intangible assets acquired during the period. 10. The original IA

21、S 14 was silent on whether prior period segment information presented for comparative purposes should be restated for a material change in segment accounting policies. IAS 14 (revised) requires restatement unless it is impracticable to do so. 11. IAS 14 (revised) requires that if total revenue from

22、external customers for all reportable segments combined is less than 75 per cent of total enterprise revenue, then additional reportable segments should be identified until the 75 per cent level is reached. file:/D:?document?ias?ias_014.htm2002-8-8IAS 14 Segment Reporting (revised 1997)?3/2412. The

23、original IAS 14 allowed a different method of pricing inter-segment transfers to be used in segment data than was actually used to price the transfers. IAS 14 (revised) requires that inter-segment transfers be measured on the basis that the enterprise actually used to price the transfers. 13. IAS 14

24、 (revised) requires disclosure of revenue for any segment not deemed reportable because it earns a majority of its revenue from sales to other segments if that segment's revenue from sales to external customers is 10 per cent or more of total enterprise revenue. The original IAS 14 had no compa

25、rable requirement. The standards, which have been set in bold italic type, should be read in the context of the background material and implementation guidance in this Standard, and in the context of the Preface to International Accounting Standards. International Accounting Standards are not intend

26、ed to apply to immaterial items (see paragraph 12 of the Preface). Objective The objective of this Standard is to establish principles for reporting financial information by segmentinformation about the different types of products and services an enterprise produces and the different geographical ar

27、eas in which it operatesto help users of financial statements: (a) better understand the enterprise's past performance; (b) better assess the enterprise's risks and returns; and (c) make more informed judgements about the enterprise as a whole. Scope 1. This Standard should be applied in c

28、omplete sets of published financial statements that comply with International Accounting Standards. 2. A complete set of financial statements includes a balance sheet, income statement, cash flow statement, a statement showing changes in equity, and notes, as provided in IAS 1, Presentation of Finan

29、cial Statements. 3. This Standard should be applied by enterprises whose equity or debt securities are publicly traded and by enterprises that are in the process of issuing equity or debt securities in public securities markets. 4. If an enterprise whose securities are not publicly traded prepares f

30、inancial statements that comply with International Accounting Standards, that enterprise is encouraged to disclose financial information by segment voluntarily. 5. If an enterprise whose securities are not publicly traded chooses to disclose segment information voluntarily in financial statements th

31、at comply with International Accounting Standards, that enterprise should comply fully with the requirements of this Standard. 6. If a single financial report contains both consolidated financial statements of an enterprise whose securities are publicly traded and the separate financial statements o

32、f the parent or one or more subsidiaries, segment information need be presented only on the basis of the consolidated financial statements. If a subsidiary is itself an enterprise whose securities are publicly traded, it will present segment information in its own separate financial report.file:/D:?

33、document?ias?ias_014.htm2002-8-8IAS 14 Segment Reporting (revised 1997)?4/247. Similarly, if a single financial report contains both the financial statements of an enterprise whose securities are publicly traded and the separate financial statements of an equity method associate or joint venture in

34、which the enterprise has a financial interest, segment information need be presented only on the basis of the enterprise's financial statements. If the equity method associate or joint venture is itself an enterprise whose securities are publicly traded, it will present segment information in i

35、ts own separate financial report. Definitions Definitions from Other International Accounting Standards 8. The following terms are used in this Standard with the meanings specified in IAS 7, Cash Flow Statements; IAS 8, Net Profit or Loss for the period, Fundamental Errors and Changes in Accounting

36、Policies; and IAS 18, Revenue: Operating activities are the principal revenue-producing activities of an enterprise and other activities that are not investing or financing activities. Accounting policies are the specific principles, bases, conventions, rules and practices adopted by an enterprise i

37、n preparing and presenting financial statements. Revenue is the gross inflow of economic benefits during the period arising in the course of the ordinary activities of an enterprise when those inflows result in increases in equity, other than increases relating to contributions from equity participa

38、nts Definitions of Business Segment and Geographical Segment 9. The terms business segment and geographical segment are used in this Standard with the following meanings: A business segment is a distinguishable component of an enterprise that is engaged in providing an individual product or service

39、or a group of related products or services and that is subject to risks and returns that are different from those of other business segments. Factors that should be considered in determining whether products and services are related include: (a) the nature of the products or services; (b) the nature

40、 of the production processes; (c) the type or class of customer for the products or services; (d) the methods used to distribute the products or provide the services; and (e) if applicable, the nature of the regulatory environment, for example, banking, insurance, or public utilities. A geographical

41、 segment is a distinguishable component of an enterprise that is engaged in providing products or services within a particular economic environment and that is subject to risks and returns that are different from those of components operating in other economic environments. Factors that should be co

42、nsidered in identifying geographical segments include: (a) similarity of economic and political conditions; file:/D:?document?ias?ias_014.htm2002-8-8IAS 14 Segment Reporting (revised 1997)?5/24(b) relationships between operations in different geographical areas; (c) proximity of operations; (d) spec

43、ial risks associated with operations in a particular area; (e) exchange control regulations; and (f) the underlying currency risks. A reportable segment is a business segment or a geographical segment identified based on the foregoing definitions for which segment information is required to be discl

44、osed by this Standard. 10. The factors in paragraph 9 for identifying business segments and geographical segments are not listed in any particular order. 11. A single business segment does not include products and services with significantly differing risks and returns. While there may be dissimilar

45、ities with respect to one or several of the factors in the definition of a business segment, the products and services included in a single business segment are expected to be similar with respect to a majority of the factors. 12. Similarly, a geographical segment does not include operations in econ

46、omic environments with significantly differing risks and returns. A geographical segment may be a single country, a group of two or more countries, or a region within a country. 13. The predominant sources of risks affect how most enterprises are organised and managed. Therefore, paragraph 27 of thi

47、s Standard provides that an enterprise's organisational structure and its internal financial reporting system is the basis for identifying its segments. The risks and returns of an enterprise are influenced both by the geographical location of its operations (where its products are produced or

48、where its service delivery activities are based) and also by the location of its markets(where its products are sold or services are rendered). The definition allows geographical segments to be based on either: (a) the location of an enterprise's production or service facilities and other asset

49、s; or (b) the location of its markets and customers. 14. An enterprise's organisational and internal reporting structure will normally provide evidence of whether its dominant source of geographical risks results from the location of its assets (the origin of its sales) or the location of its c

50、ustomers (the destination of its sales). Accordingly, an enterprise looks to this structure to determine whether its geographical segments should be based on the location of its assets or on the location of its customers. 15. Determining the composition of a business or geographical segment involves

51、 a certain amount of judgement. In making that judgement, enterprise management takes into account the objective of reporting financial information by segment as set forth in this Standard and the qualitative characteristics of financial statements as identified in the IASC Framework for the Prepara

52、tion and Presentation of Financial Statements. Those qualitative characteristics include the relevance, reliability, and comparability over time of financial information that is reported about an enterprise's different groups of products and services and about its operations in particular geogr

53、aphical areas, and the usefulness of that information for assessing the risks and returns of the enterprise as a whole.Definitions of Segment Revenue, Expense, Result, Assets, and Liabilities file:/D:?document?ias?ias_014.htm2002-8-8IAS 14 Segment Reporting (revised 1997)?6/2416. The following addit

54、ional terms are used in this Standard with the meanings specified: Segment revenue is revenue reported in the enterprise's income statement that is directly attributable to a segment and the relevant portion of enterprise revenue that can be allocated on a reasonable basis to a segment, whether

55、 from sales to external customers or from transactions with other segments of the same enterprise. Segment revenue does not include: (a) extraordinary items; (b) interest or dividend income, including interest earned on advances or loans to other segments, unless the segment's operations are pr

56、imarily of a financial nature; or (c) gains on sales of investments or gains on extinguishment of debt unless the segment's operations are primarily of a financial nature. Segment revenue includes an enterprise's share of profits or losses of associates, joint ventures, or other investment

57、s accounted for under the equity method only if those items are included in consolidated or total enterprise revenue. Segment revenue includes a joint venturer's share of the revenue of a jointly controlled entity that is accounted for by proportionate consolidation in accordance with IAS 31, F

58、inancial Reporting of Interests in Joint Ventures. Segment expense is expense resulting from the operating activities of a segment that is directly attributable to the segment and the relevant portion of an expense that can be allocated on a reasonable basis to the segment, including expenses relati

59、ng to sales to external customers and expenses relating to transactions with other segments of the same enterprise. Segment expense does not include: (a) extraordinary items; (b) interest, including interest incurred on advances or loans from other segments, unless the segment's operations are

60、primarily of a financial nature; (c) losses on sales of investments or losses on extinguishment of debt unless the segment's operations are primarily of a financial nature; (d) an enterprise's share of losses of associates, joint ventures, or other investments accounted for under the equit

61、y method; (e) income tax expense; or (f) general administrative expenses, head-office expenses, and other expenses that arise at the enterprise level and relate to the enterprise as a whole. However, costs are sometimes incurred at the enterprise level on behalf of a segment. Such costs are segment

62、expenses if they relate to the segment's operating activities and they can be directly attributed or allocated to the segment on a reasonable basis. Segment expense includes a joint venturer's share of the expenses of a jointly controlled entity that is accounted for by proportionate conso

63、lidation in accordance with IAS 31. For a segment's operations that are primarily of a financial nature, interest income and interest expense may be reported as a single net amount for segment reporting purposes only if those items are netted in the consolidated or enterprise financial statemen

64、ts.file:/D:?document?ias?ias_014.htm2002-8-8IAS 14 Segment Reporting (revised 1997)?7/24Segment result is segment revenue less segment expense. Segment result is determined before any adjustments for minority interest. Segment assets are those operating assets that are employed by a segment in its o

65、perating activities and that either are directly attributable to the segment or can be allocated to the segment on a reasonable basis. If a segment's segment result includes interest or dividend income, its segment assets include the related receivables, loans, investments, or other income-prod

66、ucing assets. Segment assets do not include income tax assets. Segment assets include investments accounted for under the equity method only if the profit or loss from such investments is included in segment revenue. Segment assets include a joint venturer's share of the operating assets of a jointly controlled entity that is accounted for by proportionate consolidation in accordance with IAS 31. Se