IFRS 8 Amendments resulting from Post-implementation Review

Background

In 2012, the IASB carried out a Post-Implementation Review ('PIR') of IFRS 8. The PIR was concluded in July 2013 and a Feedback Report published which identified six areas of potential improvements to the quality of segment reporting:

• the identification of the CODM;
• the aggregation of operating segments into reportable segments;
• the preservation of trend data on reorganisation;
• the allocation of reconciling items to individual segments;
• improvements to the understandability of the reconciliation; and
• increasing the number of reported line items.

The IASB's Exposure Draft

On 29 March 2017, the IASB published the Exposure Draft ED/2017/2 Improvements to IFRS 8 Operating Segments – Proposed amendments to IFRS 8 and IAS 34 Interim Financial Reporting with comments requested by 31 July 2017. The Exposure Draft proposes to:

• clarify the role and function of the CODM and require disclosure of the title and description of the role of the individual or group identified as the CODM;
• explain that the CODM may be an individual or a group and explain the role of any non-executive members in the CODM;
• clarify and emphasise the criteria that must be met before operating segments can be aggregated;
• require an explanation of why segments identified in the financial statements differ from segments identified in other parts of an entity's annual reporting package;
• clarify that an entity may disclose segment information in addition to that regularly reviewed by the CODM;
• clarify that reconciling items shall be given with sufficient detail in order to enable users of financial statements to understand their nature; and
• require an entity to restate segment information for all interim periods presented earlier (both of the current financial year and of prior financial years) in the first interim report following a change in the composition of an entity's reportable segments.

EFRAG's Draft Comment Letter

EFRAG published a draft comment letter on 26 April 2017 with a comment period ending on 17 July 2017.

In its draft comment letter, EFRAG welcomed the IASB's efforts to improve IFRS 8 and address issues identified in the Post-implementation Review of that Standard. EFRAG supported most of the amendments proposed in the ED, as they provide useful clarifications of the existing requirements in IFRS 8 and should therefore improve the quality of disclosure of operating segment information.

However, EFRAG expressed preliminary reservations over the proposal to require an entity to explain why the segments identified in an entity's financial statements are different to the segments reported outside the financial statements. EFRAG also expressed a concern that the proposed definition of an entity's 'annual reporting package' may prove difficult to apply in practice.  

EFRAG's Final Comment Letter

EFRAG published a final comment letter on 3 August 2017.

In October 2017, EFRAG published a feedback statement following the publication of its final comment letter on the ED. The feedback statement describes the main comments received by EFRAG in response to its draft comment letter and how these comments were considered by EFRAG in finalising its comment letter to the IASB. The feedback statement can be found here.

In its final comment letter, EFRAG retained its overall position to generally support most of the proposed amendments, however, EFRAG disagreed with:

• the proposal to require an entity to explain any differences between the segments reported under IFRS 8 and segments reported outside the financial statements as IFRS 8 reflected a management perspective and was not the appropriate place for addressing the issue; 
• the proposal to define an entity's annual reporting package in IFRS 8 as it may prove difficult to apply in practice. 

In November 2017, EFRAG TEG discussed the feedback received on the IASB proposed amendments to IFRS 8. The outcome of the discussion is reflected in EFRAG Update November 2017.

The IASB is expected to decide on the future direction of the project at a future meeting.