What are the key requirements for segment reporting under IFRS 8?

Segment reporting is a critical transparency tool that prevents companies from hiding poor-performing divisions behind consolidated numbers. IFRS 8 and ASC 280 (US GAAP) are largely converged on this topic.

The Management Approach:

Both standards use the management approach — segments are identified based on how the company's chief operating decision maker (CODM) organizes and evaluates the business internally. This means segments reflect the actual internal reporting structure, not an arbitrary breakdown.

Identifying reportable segments:

An operating segment must meet at least ONE of these quantitative thresholds:

Threshold	Rule
Revenue	≥ 10% of total revenue (external + intersegment)
Profit/Loss	≥ 10% of the greater of total segment profits or total segment losses
Assets	≥ 10% of total combined segment assets

Additionally, reportable segments must represent at least 75% of total external revenue in aggregate. If they don't, additional segments must be reported until the threshold is met.

Required disclosures per segment:

• Revenue (external and intersegment)
• Segment profit or loss (as measured by CODM)
• Segment assets
• Specific items: depreciation, interest income/expense, tax expense, material non-cash items, capital expenditures

Example: Evergreen Conglomerate operates three divisions:

• Consumer Products: Revenue $800M, Profit$120M, Assets $500M
• Industrial Services: Revenue $400M, Profit$60M, Assets $300M
• Digital Solutions: Revenue $50M, Loss ($8M), Assets $40M

Total revenue = $1,250M. 10$125M.

• Consumer Products: $800M >$125M → reportable
• Industrial Services: $400M >$125M → reportable
• Digital Solutions: $50M <$125M but check profit/loss test

Total segment profits = $180M, total segment losses =$8M. Greater = $180M. 10$18M. Digital's $8M loss <$18M → fails this test too. Check assets: $40M <$84M (10% of $840M) → fails.

Digital Solutions is not individually reportable and goes into an "All Other" category.

Analytical value: Segment data helps analysts:

• Identify cross-subsidies between divisions
• Apply different valuation multiples to different businesses (sum-of-parts)
• Assess management capital allocation decisions

Exam tip: Know the 10% thresholds and the 75% aggregation test. CFA Level II may ask you to determine which segments are reportable given a set of financial data.

Check out our CFA Level II FRA materials for more segment reporting practice.