2,195
12
2,208
Other 706
442
31
0
705
1,884
Total revenues (excluding net income
(loss) from equity accounted investments
and other income
29,519
11,420
5,647
11,423
2,991
60,999
6.2
Information about geographical areas
IFRS 8 requires disclosure of the following geographical information:
(a) revenues from external customers, analysed between amounts attributed to the entity’s
country of domicile and the total of those attributed to all foreign countries; and
(b) non-current assets other than financial instruments, deferred tax assets, post-
employment benefit assets and rights arising under insurance contracts, analysed
between assets located in the entity’s country of domicile and the total of those
located in all foreign countries. [IFRS 8.33].
In addition, if revenues from external customers or assets attributed to an individual
foreign country are material, separate disclosure of that country’s revenues or assets is
required. [IFRS 8.33]. The Standard does not indicate what might be regarded as ‘material’,
but given the criteria for a reportable segment and a major customer for reporting
purposes (see 3.2.2 above and 6.3 below respectively) it would seem appropriate to
consider the need for separate disclosure in respect of a foreign country accounting for
more than 10% of total external revenues or more than 10% of total non-current assets.
2882 Chapter 32
Disclosure of the above information would be required even if the entity’s segment
reporting is already based on geography and it is determined that individual operating
segments include a number of countries. Thus, an entity may need to provide additional
information on revenue or non-current assets by country that is not disclosed in the
segment information used by the chief operating decision maker.
The basis on which revenues from external customers are attributed to individual
countries should be disclosed. An entity can elect to provide, in addition to the
information required above, subtotals of geographical information about groups of
countries. [IFRS 8.33]. In Extract 32.13 below, BAE Systems provides this more detailed
level of disclosure and goes on to reconcile the measure of total segment assets to the
amounts shown on the statement of financial position, even though such a reconciliation
is not required for this entity-wide disclosure.
Extract 32.13: BAE Systems plc (2017)
Notes to the Group accounts [extract]
18.
Geographical analysis of assets
Analysis of non-current assets by geographical location
2017
2016
Asset location
Notes
£m
£m
UK
2,711
2,755
Rest of Europe
590
586
US
9,283
9,864
Saudi Arabia
438
443
Australia
459
474
Rest of Asia and Pacific
5
6
Non-current segment assets
13,486
14,128
Retirement benefit surpluses
21
302
223
Other financial assets
13
315
549
Tax
14,16
744
1,256
Inventories
15
723
744
Current trade and other receivables
12
3,586
3,305
Cash and cash equivalents
17
3,271
2,769
Assets held for sale
26
2
Consolidated total assets
22,453
22,976
6.3
Information about major customers
IFRS 8 also requires an entity to give disclosures indicating the extent of its reliance on
its major customers. If revenues from a single external customer account for 10% or
more of the entity’s total revenues, the entity should disclose:
(a) that
fact;
(b) the total amount of revenues from each such customer; and
(c) the identity of the reportable segment or segments reporting the revenues. [IFRS 8.34].
Operating
segments
2883
Disclosure is not required of the name of each major customer, nor the amounts of
revenue reported in each segment for that customer. [IFRS 8.34]. However, the disclosure
must be provided if it relates only to one segment.
Roche elects to provide the customers’ names in the following extract.
Extract 32.14: Roche Holding Ltd (2017)
Notes to the Roche Group Consolidated Financial Statements [extract]
2.
Operating segment information [extract]
Major customers
In total three US national wholesale distributors represent approximately a third of the Group’s revenues in 2017.
The three US national wholesale distributors are McKesson Corp. with CHF 7 billion (2016: CHF 6 billion),
AmerisourceBergen Corp. with CHF 6 billion (2016: CHF 6 billion) and Cardinal Health, Inc. with CHF 5 billion
(2016: CHF 4 billion). Approximately 96% of these revenues were in the Pharmaceuticals operating segment, with
the residual in the Diagnostics segment.
6.3.1
Customers known to be under common control
For the purposes of the above disclosures, a group of entities known to a reporting entity
to be under common control are to be considered a single customer. [IFRS 8.34].
However, judgement is required to assess whether a government (including government
agencies and similar bodies whether local, national or international), and entities known
to the reporting entity to be under the control of that government are considered a
single customer. The assessment of whether entities should be regarded as a single
customer for these purposes should take into account the extent of economic
integration between those entities. [IFRS 8.34]. The standard does not include any further
guidance on the factors relevant to determining the extent of economic integration.
BAE Systems identifies revenues from three principal governments.
Extract 32.15: BAE Systems plc (2017)
Notes to the Group accounts [extract]
1. Segmental
analysis [extract]
Revenue by major customer
Revenue from the Group’s three principal customers, which individually represent over 10% of total revenue,
is as follows:
2017
2016
£m
£m
US Department of Defense
4,558
4,319
UK Ministry of Defence1
4,348
4,402
Kingdom of Saudi Arabia Ministry of Defence and Aviation
2,967
3,726
1. Includes £0.9bn (2016 £1.0bn) generated under the Typhoon workshare agreement with Eurofighter
Jagdflugzeug GmbH.
Revenue from the UK Ministry of Defence and the US Department of Defense was generated by the five principal
reporting segments. Revenue from the Kingdom of Saudi Arabia Ministry of Defence and Aviation was
generated by the Platforms & Services (UK) and Platforms & Services (International) reporting segments.
2884 Chapter 32
In its segment disclosures made under FASB ASC Topic 280, Lockheed Martin provides
more detailed information about customer revenues by segment as well as total
revenues for foreign governments and commercial customers.
Extract 32.16: Lockheed Martin Corporation (2017)
Notes to Consolidated Financial Statements [extract]
Note 5 –
Information on Business Segments [extract]
Selected Financial Data by Business Segment [extract]
Net Sales by Customer Category [extract]
Net sales by customer category were as follows (in millions):
2017
2016 2015
U.S. Government
Aeronautics
$ 12,753
$ 11,714 $
11,195
Missiles and Fire Control
4,640
4,026
4,150
Rotary and Mission Systems
9,834
9,187
6,961
Space
8,097
8,543
8,845
Total U.S. Government net sales
$ 35,324
$ 33,470 $
31,151
International (a)
Aeronautics
$ 7,307
$
5,973
$
4,328
Missiles and Fire Control
2,423
2,444
2,449
Rotary and Mission Systems
4,006
3,798
2,016
Space
1,305
488
218
Total international net sales
$ 15,041
$ 12,703 $
9,011
U.S. Commercial and Other
Aeronautics
$
88
$
82 $ 47
Missiles and Fire Control
149
138
171
Rotary and Mission Systems
375
477
114
Space
71
378
42
Total U.S. commercial and other net sales
$
683
$
1,075 $
374
Total net sales
$ 51,048
$ 47,248 $
40,536
(a)
International sales include foreign military sales contracted through the U.S. Government, direct commercial
sales with international governments and commercial and other sales to international customers.
7
RESULTS OF THE POST-IMPLEMENATION REVIEW OF
IFRS 8
As noted at 1.1 above, IFRS 8 is the first standard to have been subject to a post-
implementation review (PIR), which was added to the IASB’s due process by the
Trustees in 2007. The first phase of the PIR consisted of an initial assessment of the
issues related to IFRS 8 and consultation with interested parties to establish the
objective and scope of the review. As a second step of the PIR, the IASB issued in July
2012 its first due process document, Request for Information – Post-implementation
Review: IFRS 8 Operating Segments, which was intended to formally gather
information from the various groups of IASB’s constituents about their experience with
implementing IFRS 8.8
Operating
segments
2885
The Request for Information included open questions which focused not only on those
aspects of IFRS 8 which had been considered to be the benefits of the new segment
approach but also on the aspects of the Standard that were considered to be
controversial when it was issued, including the effects of:
• using the management perspective;
• using non-IFRS measurements in segment reporting;
• using internally-reported line items;
• the IFRS 8 disclosures on the role of preparers and investors; and
• the implementation of IFRS 8 on preparers and investors.
In July 2013, the IASB issued its Report and Feedback Statement – Post-implementation
Review: IFRS 8 Operating Segments, which summarised the PIR process, the feedback
received and conclusions reached by IASB.9 The IASB found that preparers generally
think that the standard works well. While auditors, accounting firms, standard-setters and
regulators were generally supportive of the Standard, some improvements were suggested
for its application. In contrast, feedback from investor groups was mixed. Some investors
prefer to have segment information based on the measures used by management,
especially where this is consistent with information in the management commentary and
in presentations to analysts. In some cases, investors expressed concern that a process
based on the management perspective allowed segments to be presented in a way that
obscures the entity’s true management structure (often as a result of concerns about
commercial sensitivity) or to mask loss-making activities within individual segments.10
Based on the feedback, the IASB concluded that the benefits of applying the Standard
were largely as expected and that overall the Standard achieved its objectives and has
improved financial reporting. The IASB noted the concerns raised by some investors
but concluded that they do not suggest significant failings in the Standard and therefore
do not warrant a revision of the principles underlying IFRS 8.11
However, the IASB acknowledged that some issues could be considered for
improvement and, in March 2017, issued an Exposure Draft proposing a limited number
of improvements to the standard as follows:12
(a) to emphasise that the CODM is a function that makes operating decisions and
decisions about allocating resources to, and assessing the performance of, the
operating segments of an entity;
(b) to explain that the CODM could be either an individual or a group;
(c) to explain the role of non-executive members when identifying an entity’s CODM
(d) to require disclosure of the title and description of the entity’s CODM;
(e) to require an explanation in the notes to the financial statements when segments
identified by an entity differ between the financial statements and other parts of
its annual reporting package;
(f) to add more examples of similar economic characteristics to the aggregation
criteria in paragraph 12 of IFRS 8;
2886 Chapter 32
(g) to clarify that an entity may disclose segment information in addition to that
reviewed by, or regularly provided to, the CODM if that helps to meet the core
principle of the Standard; and
(h) to clarify that the explanation of reconciling items should be sufficiently detailed
to enable users to understand their nature.
The IASB concluded that it was not necessary to extend the requirements of IFRS 8
regarding the presentation of comparative information in the event of a reorganisation
(see 5.
7.1 above). However, the Board proposed to amend IAS 34 to require that an
entity presents restated segment information for all comparative interim periods in the
first interim report following a reorganisation, unless the information is not available or
the cost to develop it would be excessive.13
In March 2018, based on the feedback received, the IASB decided not to proceed with
these proposed amendments. Whilst it continued to support the proposals relating to
items (d), (e) and (h) above, together with the proposed amendment to IAS 34, the Board
decided that, taken in aggregate, the remaining proposals would not result in sufficient
improvements to justify the costs to stakeholders of implementing an amended
standard.14 At the time of writing, a summary of the feedback and the Board’s response
is expected to be issued in the last quarter of 2018.15
References
1
Press Release, Summary of the IASC
10
Report and Feedback Statement Post-
Foundation Trustees meeting 2 and 3 July
implementation Review: IFRS
8 Operating
2007, Madrid, IFRS Foundation, 18 July 2007.
Segments, July 2013, p.5.
2
IFRIC Update, July 2011.
11
Report and Feedback Statement Post-
3
ED
8,
Operating Segments, IASB, January 2006.
implementation Review: IFRS
8 Operating
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