Our ‘Insights into IFRS 8’ series considers some key implementation issues and includes interpretational guidance in certain problematic areas. We also include several examples illustrating the Standard’s requirements. This article sets out the requirements when aggregating operating segments, which is closely linked to reportable segments.

Management needs to monitor how they are performing, how they need to allocate their resources and how they can create successful strategies in their markets, so high quality management accounts are key to helping them achieve this. IFRS 8 ‘Operating Segments’ aligns external reporting with what is reported internally by management by identifying and reporting operating segments.

Aggregation of operating segments prior to identifying reportable segments

IFRS 8 permits (but does not require) operating segments to be aggregated for reporting purposes if and only if certain criteria are satisfied. Aggregation often improves the usefulness of the disclosures by avoiding excessive detail and focusing more readily on the overall trends and key information. The criteria (highlighted in 'Aggregation of operating segments') ensure that only segments with similar economic risks and prospects are aggregated.

Once aggregation has been considered, single operating segments or groups of operating segments (where permitted) are reportable segments if they exceed certain quantitative thresholds. The thresholds are based on a comparison of segment revenues, profit or loss and assets with equivalent amounts for all the operating segments.

Any identified segments or groups of segments that do not meet the criteria for separate disclosure as reportable segments may nonetheless need to be reported to meet the 75% revenue test in ‘Insights to IFRS 8 – Reportable Segments’. The remaining operating segments or groups are combined and disclosed in an ‘all other segments’ category. However, an entity is allowed to report segment information for any of these smaller operating segments or aggregations of operating segments if it is considered useful to users of the financial statements.

How we can help

We hope you find the information in this article helpful in giving you some insight into IFRS 8. If you would like to discuss any of the points raised, please speak to your usual Grant Thornton contact or your local member firm.

Insights into IFRS 8

Insights into IFRS 8

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