See Airbus Industrie and Lufthansa annual reports Rationale for adopting the

See airbus industrie and lufthansa annual reports

This preview shows page 2 - 4 out of 13 pages.

See Airbus Industrie and Lufthansa annual reports Rationale for adopting the ‘management approach’ - From press release of the IASB: - The IASB believes that adopting the management approach will improve financial reporting. First, it allows users of financial statements to review the operations through the eyes of management . - Secondly, because the information is already used internally by management, there are few costs for preparers and the information is available on a timely basis. This means that interim reporting of segment information can be extended beyond the current requirements
Image of page 2
Definition of an operating segment - The Appendix to AASB 8 states: - An operating segment is a component of an entity o (a) that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity) o (b) whose operating results are regularly reviewed by the entity’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance, and o (c) for which discrete financial information is available Identification of segments - Given the definition of operating segments (just provided) we can see that AASB 8 relies upon how the organisation identifies its operating segments, rather than imposing a particular basis of segment identification upon an entity - That is, AASB 8 requires identification of operating segments on the basis of internal reports that are regularly reviewed by the entity’s chief operating decision maker in order to allocate resources to the segment and assess its performance But, who is the chief operating decision maker? - As we now know, an operating segment is a component of an entity about which separate financial information is available and which is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance - In this regard, paragraph 7 of AASB 8 states: o The term ‘chief operating decision maker’ identifies a function, not necessarily a manager with a specific title. That function is to allocate resources to and assess the performance of the operating segments of an entity. Often the chief operating decision maker of an entity is its chief executive officer or chief operating officer but, for example, it may be a group of executive directors or others - The focus of the chief operating decision maker (whether an individual or a group of individuals) therefore dictates which components of an entity are deemed to be operating segments for the purposes of AASB 8 Can all components of an organisation be deemed to be part an operating segment? - Not all parts of an entity will be considered to be part of an operating segment. As paragraph 6 of AASB 8 states: ( o Not every part of an entity is necessarily an operating segment or part of an operating segment. For example, a corporate headquarters or some functional departments
Image of page 3
Image of page 4

You've reached the end of your free preview.

Want to read all 13 pages?

  • '11
  • she
  • Balance Sheet, Generally Accepted Accounting Principles

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern

Stuck? We have tutors online 24/7 who can help you get unstuck.
A+ icon
Ask Expert Tutors You can ask You can ask You can ask (will expire )
Answers in as fast as 15 minutes
A+ icon
Ask Expert Tutors