12.2 lLecture_13_October_Segment_Reportingreviseda

12.2 lLecture_13_October_Segment_Reportingreviseda - ACIS...

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1 ACIS 211 Company Accounting 2009 Segment Reporting Bill Foster Room 619 [email protected]
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2 In your own time question Diversified Company
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3 Overview I. Rationale for segment reporting II. Advantages of segment reporting III. Disadvantages of segment reporting IV. NZ IFRS 8 V. Identifying reportable segments: Operating segments VI. Reportable segments a. Aggregating segments b. Quantative thresholds I c. Example for test 13b d. Quantative threshold II e. Overall example VII. Disclosures: General requirements
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4 VIII. Disclosures: Specific requirements a. Information about geographical areas b. Information about major customers IX. Disclosures: Measurement X. Disclosures: Reconciliation XI. Effective date of NZIFRS 8 and IFRS 8 XII. Colt Telecom SA segment disclosures XIII. The Warehouse segment disclosures
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5 Reading Deegan & Samkin Chapter 21 NZ IFRS 8 Operating Segments
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6 I. Rationale for segment reporting Companies are becoming increasingly diversified and multinational -- they are combining different areas of economic activities (segments) into one economic entity Geographical areas
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7 Aggregation in consolidated financial statements leads to Loss of information Smoothing of overall results Hiding poorly performing segments
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8 Company segments have different Rates of return (and variance of returns) Risk levels (different locations have different risks) Business opportunities and threats
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9 II. Advantages of segment reporting Disaggregating the consolidated financials allows investors to: Evaluate risks vs. returns by segment Better understand the past performance of the group Obtain more detailed information for decision making Use segment information for “ethical investment” decisions
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10 Segment reporting Supplements consolidated (aggregated) financials Is based on management’s perspective – corresponds to internal management’s reports Might be different than what is used to prepare the income statement and the balance sheet
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11 III. Disadvantages of segment reporting Leads to additional costs for reporting entity Competitors, both current and potential, will have access to more detailed information
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12 Provides special interest groups, e.g. unions, environmentalists, with information that could be used against the company Inter-segment sales might draw unwarranted attention from fiscal agencies/governments
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13 IV. NZ IFRS 8 Applies to every entity whose debt or equity instruments are traded in a public market i.e. a domestic or foreign stock exchange or an over-the-counter market, including local and regional markets; or that files, or is in the process of filing, its financial statements with a regulatory organisation for the purpose of issuing any class of instruments in a public market
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This note was uploaded on 12/23/2009 for the course BCOM ACIS 211 taught by Professor Susanwild during the Spring '09 term at Canterbury.

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12.2 lLecture_13_October_Segment_Reportingreviseda - ACIS...

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