PFRS 8 - Operating Segments

PFRS 8 Operating Segments
Core principle
 “An entity shall disclose information

to enable users of its financial
statements to evaluate the nature
and financial effects of the business
activities in which it engages and
the economic environments in
which it operates.” (PFRS 8)
Conceptual Framework & Acctg. Standards (by: Zeus Vernon B. Millan) 2

Scope
 PFRS 8 applies to the separate, individual and
consolidated financial statements of an entity which
is publicly listed or in the process of enlisting
publicly.
 An unlisted entity that chooses to apply PFRS 8 shall

comply with all of the requirements of PFRS 8;
otherwise it shall not describe the information as
segment information.
 If a financial report contains both the consolidated

and separate financial statements of a parent that is
within the scope of PFRS 8, segment information is
required only in the consolidated financial
statements.

Operating Segments
 An operating segment is a component of an
entity:
1. 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),
2. 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
3. for which discrete financial information is
available.
Component of an entity
A component of an entity
comprises operations and cash
flows that can be clearly
distinguished, operationally and
for financial reporting purposes,
from the rest of the entity. It can
be cash generating unit or group
of cash generating units.

Reportable segments
 An entity shall report separately

information about each operating
segment that:
1. Management uses in making
decisions about operating matters
or those which results from
aggregating two or more of those
segments; and
2. Qualify under the quantitative
thresholds
Management approach
 PFRS 8 adopts a management
approach to identifying reportable
segments.
 Under the management approach,

operating segments are identified 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.
Aggregation criteria
 Two or more operating segments may be aggregated
into a single operating segment if the segments have
similar economic characteristics, and the segments
are similar in each of the following respects:
1. Nature of the products and services;
2. Nature of the production processes;
3. Type or class of customer for their products and
services;
4. The methods used to distribute their products or
provide their services; and
5. Nature of the regulatory environment, if applicable,
e.g., banking, insurance or public utilities.
Quantitative thresholds
 An entity shall report separately information about an
operating segment that meets any of the following
quantitative thresholds:
1. The segment’s revenue is at least 10% of the total
revenues (external and internal);
2. The segment’s assets is at least 10% of the total
assets (external and internal, e.g., intersegment
receivables)
3. The segments profit or loss is at least 10% of the
greater, in absolute amount of:
a. the combined reported profit of all operating
segments that did not report a loss and
b. the combined reported loss of all operating
segments that reported a loss.
Limit on external revenue
 The total external revenue

reported by reportable segments
shall at least 75% of the entity’s
external revenue.

Disclosure of Major
customer
A major customer is a single

external customer providing
revenues of 10% or more of an
entity’s revenues.

Other disclosures
 Entity-wide disclosures apply to all entities
subject to PFRS 8 including those entities
that have a single reportable segment.
 Revenues from external customers
attributed to the entity’s country of domicile
and attributed to all foreign countries in
total from which the entity derives
revenues.
 Non-current assets other than financial
instruments, deferred tax assets, post-
employment benefit assets, and rights arising
under insurance contracts located in the
entity’s country of domicile and located in
all foreign countries in total in which the
entity holds assets.

PFRS 8 - Operating Segments

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PFRS 8 Operating Segments

 “An entity shall disclose information

Conceptual Framework & Acctg. Standards (by: Zeus Vernon B. Millan) 2

 An unlisted entity that chooses to apply PFRS 8 shall

 If a financial report contains both the consolidated

Conceptual Framework & Acctg. Standards (by: Zeus Vernon B. Millan) 3

Conceptual Framework & Acctg. Standards (by: Zeus Vernon B. Millan) 5

 An entity shall report separately

 Under the management approach,

 The total external revenue

Conceptual Framework & Acctg. Standards (by: Zeus Vernon B. Millan) 10

A major customer is a single

Conceptual Framework & Acctg. Standards (by: Zeus Vernon B. Millan) 11

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