18 July 2013

IASB: Post-implementation review of IFRS 8 Operating Segments

The IASB announced the completion of its Post-implementation Review of IFRS 8 Operating Segments. The purpose of the review was to consider whether the new Standard is functioning as anticipated, has achieved its objectives, and has improved financial reporting.

Post-implementation Reviews are conducted by the IASB normally two years after the global application of a new Standard or a significant amendment to an existing Standard.  The purpose of the review is to consider whether the new Standard is functioning as anticipated, has achieved its objectives and improved financial reporting.  Any resulting actions identified by the review are subject to the normal processes and criteria for adding an item to the IASB’s agenda.

The Trustees’ Due Process Oversight Committee (DPOC) encouraged staff to use this first Post-implementation Review of a Standard to further develop the process for future reviews.  Accordingly, following feedback received during this consultation process, the IASB broadened the scope of these reviews and further enhanced the transparency of the process through the inclusion of formal public consultation. These changes were added to the IASB’s Due Process in January 2013.

The review of IFRS 8 concluded that the Standard was generally functioning as anticipated.  Those limited areas where further investigation is warranted will also be subject to liaison with the FASB and will be considered within the context of the convergence with US GAAP achieved by IFRS 8.

Commenting on the announcement, Hans Hoogervorst, chairman of the IASB said: “Post-implementation reviews are an important step in our due process as they provide a mechanism to make sure our Standards are working as intended. This first review shows us that overall IFRS 8 achieved its objectives, although the report has highlighted some areas to the IASB where further targeted improvements could be made."

Preparers generally think that the Standard works well. Auditors, accounting firms, standard setters and regulators generally support the Standard, but have made some suggestions to improve its application. Views on IFRS 8 received from investors were mixed.

Some investors prefer to have information about how management views the business, as IFRS 8 requires. When all aspects of an entity’s reporting align so that operating segment information in the financial statements, management commentary and presentations to analysts all agree, this provides more detailed, integrated information to them. In addition, the fact that the IFRS 8 information is audited increases the value that investors attribute to the other sources of consistent segment information.

Other investors, however, are wary of a segmentation process that is based on the management perspective. Those investors mistrust management’s intentions and sometimes think that segments are reported in such a way as to obscure the entity’s true management structure (often as a result of concerns about commercial sensitivity) or to mask loss-making activities within individual segments.

Press release

Report and feedback statement

© IASB - International Accounting Standards Board