New Zealand International Financial Reporting Standard 8 (NZ IFRS 8) Operating Segments replaced New Zealand International Accounting Standard 14 (NZ IAS 14) Segments Reporting. Since 2009 NZ IFRS 8 has been compulsory. This essay will be covering the definition of an Operating Segment and the major changes that have occurred. It will also include summary of number and type of operating segments of the five listed companies in Part A and discussion on whether information provided under NZ IFRS 8 is of greater quality and useful for decision makers.
An operating segment as defined in NZ IFRS 8 “is a component of an entity that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity); whose operating results are regularly reviewed by the entity’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available”. (External Reporting Board, n.d.).
The main changes that have occurred as a result of the change from NZ IAS 14 to NZ IFRS 8, is how segments are identified. NZ IFRS 8 concentrates on operating segments and various disclosures made on these operating segments. NZ IAS 14 concentrates on the segment reporting of the entity. NZ IFRS 8 identifies operating segments based on internal reports reviewed regularly by the chief operating decision maker to allocate resources to the segment and assess the performance whereas NZ IAS 14 identifies two set of segments based on related products and services, and a secondary segment in order to help financial statement users to have better understandin...
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...three operating segments in the notes and accounting policies. It has disclosed the reconciliations of the totals of segment income to income statement, segment EBITDA to income statement. The 2012 Annual Report contains general information on how operating segments are identified and types of products and services these operating segments derive revenue. However, 2007 Annual report disclosed revenue and expenses as a group in one geographic segment. There are no separate disclosures about each reportable segment.
Thus, the information provided using NZ IFRS 8 provides quality information that is of greater use to the management, investors and other users of financial users for decision making. The detailed information disclosure requirement has improved the consistency with management discussion and analysis, and provides diverse measures of segment performance.
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