IFRS 8 Operating Segments: Reporting Financial Performance

IFRS 8 Operating Segments – How Companies Report Segment Performance

1️⃣ Introduction: Understanding IFRS 8 Operating Segments

IFRS 8 Operating Segments sets the rules for reporting the financial performance of different business segments within a company.
In Singapore, many firms operate across multiple services, locations, or revenue streams. Therefore, IFRS 8 Operating Segments helps companies present information that reflects how management monitors performance internally.
This approach gives investors clearer insight into what drives profitability and growth.

2️⃣ Purpose and Scope

IFRS 8 applies to companies whose debt or equity securities trade in a public market.
Many private entities also follow IFRS 8 voluntarily to strengthen transparency.
The standard requires disclosures that mirror a company’s internal reporting to its Chief Operating Decision Maker (CODM) — usually the CEO, board, or executive committee.

As a result, users gain a realistic view of how the business is managed and evaluated.

3️⃣ What Is an Operating Segment?

An operating segment is a component of a company that:

Earns revenue and incurs expenses,
Has results reviewed regularly by the CODM, and
Has discrete financial information available.

Examples of segments for a Singapore group may include:

Audit and assurance
Corporate secretarial
Tax advisory
Digital marketing services
Overseas subsidiaries (Malaysia, Vietnam)

In addition, IFRS 8 requires aggregation only when segments have similar economic characteristics.

4️⃣ Identification of Reportable Segments

A company must disclose a segment when it meets any of the following thresholds:

Revenue test: Segment revenue ≥ 10% of total revenue.
Profit or loss test: Segment profit or loss ≥ 10% of total profits or losses.
Asset test: Segment assets ≥ 10% of total assets.

If total external revenue of reportable segments is <75% of company revenue, additional segments must be disclosed until the 75% threshold is met.

Therefore, readers see all significant parts of the business.

5️⃣ Measurement of Segment Information

IFRS 8 requires segment disclosures to follow the same measurement principles used for internal reporting.

This includes:

Segment revenue and expenses
Segment profit or loss
Segment assets and liabilities (if provided internally)
Basis of allocation for shared costs

As a result, financial statements reflect real-world management practices rather than theoretical classifications.

6️⃣ Reconciliations

Companies must reconcile:

Total segment revenue to total entity revenue
Total segment profit/loss to entity profit/loss
Total segment assets to total entity assets

These reconciliations help users understand differences between internal reporting and IFRS reporting.

7️⃣ Entity-Wide Disclosures

Even if a company has only one segment, IFRS 8 requires disclosure of:

Products and services
Geographical areas (Singapore, Malaysia, Vietnam, etc.)
Major customers (those contributing ≥10% of revenue)

In addition, these disclosures highlight concentration risks and growth opportunities.

8️⃣ Example: IFRS 8 in Practice

Scenario:
uSafe Group provides:

Audit & Assurance
Corporate Services
Tax Advisory
Vietnam Outsourcing Services

Management reviews each division’s revenue, direct expenses, and profit monthly.
Audit contributes 45%, Corporate Services 30%, Tax 15%, and Vietnam 10% of group revenue.

➡ Under IFRS 8 Operating Segments, all four divisions become reportable segments.
➡ The company also discloses revenue by country and any customers representing ≥10% of total revenue.

Consequently, stakeholders get a clear view of growth engines and segment performance.

IFRS 7 Financial Instruments: Disclosures

9️⃣ Common Errors

Ignoring CODM information and defining segments incorrectly.
Omitting reconciliations to consolidated totals.
Aggregating unrelated segments without valid justification.
Leaving out geographical or major-customer disclosures.

Avoiding these errors improves transparency and audit quality.

🔟 Best Practices

To comply with IFRS 8 effectively:

✅ Document how the CODM monitors performance.
✅ Maintain consistent internal reporting packages.
✅ Review segment thresholds annually.
✅ Provide clear tables with revenue, profit, and assets by segment.

In addition, use simple transition words like as a result, therefore, and however to improve clarity.

Conclusion

IFRS 8 Operating Segments ensures companies present segment performance in a way that reflects internal decision-making.
Therefore, applying IFRS 8 gives investors a clearer picture of business structure, profitability drivers, and strategic direction, especially for companies with diversified operations across Singapore and the region.

Disclaimer: This article is for informational purposes only and does not constitute any professional advice. Feel free to contact us to consult with our professional advisors team for personalized advice and guidance.

Sources: https://www.ifrs.org/issued-standards/list-of-standards/ifrs-8-operating-segments/