Summary Segment reporting provides information about the performance and

Summary segment reporting provides information about

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Summary - Segment reporting provides information about the performance and financial position of various operating segments - It provides a useful supplement to consolidated financial statements where data is aggregated - Benefits of segment reporting include that it allows: o for more informed decision making relating to future profitability and risk exposure of an entity o management to demonstrate greater accountability o interested parties to know in which sectors and locations the entity operates - Perceived costs in relation to segment data include the following: o Creation of a competitive disadvantage o Possibility encourages takeover bids for poorly performing segments o Possibility of profitable segments attracting unwelcome attention from government and interest groups - The relevant Australian Accounting Standard pertaining to segment disclosures is AASB 8 Operating Segments; and the HK standard is HKFRS 8 - The standard requires the disclosure of financial information about an entity’s operating segments - Operating segments are identified on the basis of the components of the organisation that the chief operating decision maker reviews in making decisions about resources to be allocated to the segments, and as part of the process of assessing their performance - Once a component of an entity is deemed to be an operating segment, quantitative criteria are provided to determine whether the segment is reportable (any of 10% of total segment revenues; 10% of the absolute amount of the greater of total profitable segments’ profit or the total of the loss-making segments’ losses; 10% of total segment assets) - In addition, ‘reportable segments’ are required to constitute not less than 75% of the entity’s total revenues - In providing financial information about operating segments’ revenues, profits, assets and liabilities, the entity is to provide measurements that utilise the amounts used for internal decision making - That is, segment disclosures do not have to be based on the measurements that are required to be used to generate the entity’s financial statements
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- AASB 8 requires a number of financial disclosures relating to reportable segments. It also requires reconciliations of total reportable segment revenues, total profit or loss, total segment liabilities and total segment assets to corresponding amounts in the entity’s financial statements - AASB 8 also requires a number of entity-wide disclosures. Such disclosures relate to the entity’s products and services, geographical information, and information about major customers Requirements of project - The comparison should include, but not be limited to, the following: o the number, and nature, of operating segments reported; o which segment items are reconciled to the company’s consolidated financial statements; o information about geographical areas in which the company operates, including revenues from external customers and non-current assets, indicating how extensively the company operates outside its country/region of origin, where its headquarters is located.
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