INTRODUCTION

Segmental information has an important role in external reporting, by providing information to investors and to the market which assist their understanding of an entity's results for the year.

The core principle set out in IFRS 8 requires an entity to disclose information that enables users of the financial statements to evaluate the nature and financial effects of the business activities in which the entity engages and the economic environments in which it operates. This should be considered when an entity forms its judgements about how and what information should be disclosed.

SCOPE

IFRS 8 applies to:

1. The separate or individual financial statements of an entity:
   1. Whose debt or equity instruments are traded in a public market (a domestic or foreign stock exchange or an over‐the‐counter market, including local and regional markets); or
   2. That files, or is in the process of filing, its financial statements with a securities commission or other regulatory organisation for the purpose of issuing any class of instruments in a public market; and
2. The consolidated financial statements of a group with a parent:
   1. Whose debt or equity instruments are traded in a public market (a domestic or foreign stock exchange or an over‐the‐counter market, including local and regional markets); or
   2. That files, or is in the process of filing, the consolidated financial statements with a securities commission or other regulatory organisation for the purpose of issuing any class of instruments in a public market.

Where an entity voluntarily applies this IFRS, the entity must comply with all the requirements in this IFRS. If the entity does not comply with all the requirements, such information cannot be disclosed as segment information.

If a financial report contains both the consolidated financial statements of a parent that is within the scope of this IFRS as well as the parent's separate financial statements, segment information is required only in the consolidated financial statements.

A regulatory requirement to file financial statements does not equate to financial statements linked to the process of issuing instruments to a public market. In such instances, the entity would not be subjected to the disclosure requirements of IFRS 8.

DEFINITIONS OF TERMS

Chief operating decision maker. The term “chief operating decision maker” identifies a function, not necessarily a manager with a specific title. That function is to allocate resources to and assess the performance of the operating segments of an entity. Often the chief operating decision maker of an entity is its chief executive officer or chief operating officer but, for example, it may be a group of executive directors or others. Deciding who the chief operating decision maker is can be difficult and judgement is needed to ensure that the right person or persons have been identified. Where the board of directors include non‐executive directors, it may not be appropriate to classify the board as the chief operating decision maker. This is because the non‐executive directors are not usually involved in the day‐to‐day activities of the entity (and therefore the resource allocation decisions); their role is a governance one and not a management one.

Common costs. Operating expenses incurred by the enterprise for the benefit of more than one business segment.

Corporate assets. Assets maintained for general corporate purposes and not used in the operations of any business segment.

General corporate expenses. Expenses incurred for the benefit of the corporation as a whole, which cannot be reasonably allocated to any segment.

Identifiable assets. Those tangible and intangible assets used by a business segment, including those the segment uses exclusively, and an allocated portion of assets used jointly by more than one segment.

Inter‐segment sales. Transfers of products or services, similar to those sold to unaffiliated customers, between business segments or geographic areas of the entity.

Intra‐segment sales. Transfers within a business segment or geographic area.

Operating activities. The principal revenue producing activities of an entity and other activities that are not investing or financing activities.

Operating profit or loss. A business segment's revenue minus all operating expenses, including an allocated portion of common costs.

Operating segment. 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 segments and assess its performance; and
• For which discrete financial information is available.

Reportable segment. Operating segments that:

• Have been identified in accordance with the above definition or result from aggregating two or more of those segments in accordance with aggregation criteria; and
• Exceed the quantitative thresholds.

Segment accounting policies. The policies adopted for reporting the consolidated financial statements of the entity, as well as for segment reporting.

Segment assets. Operating assets employed by a segment in operating activities, whether directly attributable or reasonably allocable to the segment; these should exclude those generating revenues or expenses which are excluded from the definitions of segment revenue and segment expense.

Segment expense. Expense that is directly attributable to a segment, or the relevant portion of expense that can be allocated on a reasonable basis to a segment; it excludes interest expense, losses on sales of investments or extinguishment of debt, equity method losses of associates and joint ventures, income taxes and corporate expenses not identified with specific segments.

Segment revenue. Revenue that is directly attributable to a segment, or the relevant portion of revenue that can be allocated on a reasonable basis to a segment, and that is derived from transactions with parties outside the enterprise and from other segments of the same entity; it excludes interest and dividend income, and gains on sales of investments or extinguishment of debt.

Transfer pricing. The pricing of products or services between business segments or geographic areas.

IDENTIFICATION

Identification of operating segments within business organisations has grown in complexity over the years, and the conglomerate form of organisation (where unrelated or dissimilar operations are united within one reporting entity, sometimes to provide the overall entity with benefits of counter cyclicality among the constituent operations) has become normal practice, and it consequently has become necessary to concede that financial statements which present the full scope of an entity's operations on an aggregated basis declined markedly in usefulness without further relevant detail.

While it is certainly possible to assess the overall financial health of the reporting entity using such financial reports, it is much more difficult to evaluate management's operating and financial strategies, particularly with regard to its emphasis on specific lines of business or geographic spheres of operation. For example, the extent to which operating results for a given period are the consequence of the development of new products having greater potential for future growth, compared to more mature product lines which nonetheless still account for a majority of the entity's total sales, would tend to be masked in financial statements which did not present results by business segment.

IFRS 8 does not define but requires an explanation of how segment profit or loss, segment assets and segment liabilities are determined and measured for each reportable segment. This standard also requires general and entity‐wide disclosures, including information about products and services, geographical areas, major customers and important factors used to identify an entity's reportable segments.

CONCEPTS AND REQUIREMENTS

IFRS 8 establishes how an entity is to report information about its operating segments in annual financial statements. Additionally, due to a consequential amendment made to IAS 34, entities are required to report selected information about their operating segments in interim financial reports, when interim reports are issued. IFRS 8 also sets out requirements for related disclosures about products and services, geographical areas and major customers.

IFRS 8 requires that an entity report financial and descriptive information about its reportable segments. Reportable segments are defined as operating segments or aggregations thereof that meet certain defined criteria. Operating segments are components of an entity about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Generally, segment financial information is required to be reported on the same basis as is used internally for evaluating operating segment performance and deciding how to allocate resources to operating segments. This conforms to the objective of putting users in the “shoes of management” in their ability to evaluate management performance.

In the past, there had been debate over the value and validity of disclosing results of operations on a segmental basis. IFRS 8 requires an entity to report a measure of operating segment profit or loss and of segment assets. It also requires the reporting entity to report a measure of segment liabilities and income and expense items if such measures are regularly provided to the chief operating decision maker. It requires reconciliations of total reportable segment revenues, total profit or loss, total assets, liabilities and other amounts disclosed for reportable segments to corresponding amounts in the entity's financial statements.

IFRS 8 also generally requires certain informational disclosures apart from any correspondence to information used in making management operating decisions. This includes information about the revenues derived from its products or services (or groups of similar products and services), about the countries in which it earns revenues and holds assets and about major customers. However, information that is not prepared for internal use need not be reported if the necessary information is not available and the cost to develop it would be excessive.

Descriptive information about the way the operating segments were determined, the products and services provided by the segments, differences between the measurements used in reporting segment information and those used in the entity's financial statements, and changes in the measurement of segment amounts from period to period must also be provided in the notes to the financial statements. This information is necessary for users to meaningfully interpret the operating segment financial data, including making comparisons to prior periods.

DISCLOSURE REQUIREMENTS

A reporting entity is required to disclose information to enable users of its financial statements to evaluate the nature and financial effects of the business activities in which it engages and the economic environments in which it operates.

The reporting entity is required to disclose the following for each period for which a statement of comprehensive income is presented:

1. General information:
   1. The factors used to identify the entity's reportable segments, including the basis of organisation (for example, whether management has chosen to organise the entity around differences in products and services, geographical areas, regulatory environments, or a combination of factors, and whether operating segments have been aggregated);
   2. The judgements made by management in applying the aggregation criteria in paragraph 12 of IFRS 8. This includes a brief description of the operating segments that have been aggregated in this way and the economic indicators that have been assessed in determining that the aggregated operating segments share similar economic characteristics; and
   3. The types of products and services from which each reportable segment derives its revenues.
2. Information about reported segment profit or loss, including specified revenues and expenses included in reported segment profit or loss, segment assets, segment liabilities and the basis of measurement, as follows:
   1. A measure of profit or loss for each reportable segment;
   2. A measure of total assets and liabilities for each reportable segment if such amounts are regularly provided to the chief operating decision maker;
   3. The following information about each reportable segment if the specified amounts are included in the measure of segment profit or loss reviewed by the chief operating decision maker or are otherwise regularly provided to the chief operating decision maker even if not included in that measure of segment profit or loss:
      1. Revenues from contracts with customers;
      2. Revenues from transactions with other operating segments of the same entity;
      3. Interest revenue;
      4. Interest expense;
      5. Depreciation and amortisation;
      6. Material items of income and expense disclosed in accordance with IAS 1, Presentation of Financial Statements;
      7. The entity's interest in the profit or loss of associates and joint ventures accounted for by the equity method;
      8. Income tax expense or income; and
      9. Material non‐cash items other than depreciation and amortisation.

         An entity is to report interest revenue separately from interest expense for each reportable segment unless a majority of the segment's revenues are from interest and the chief operating decision maker relies primarily on net interest revenue to assess the performance of the segment and make decisions about resources to be allocated to the segment. In that situation, an entity may report that segment's interest revenue net of its interest expense and disclose that it has done so.

   4. The reporting entity is to disclose the following about each reportable segment if the specified amounts are included in the measure of segment assets reviewed by the chief operating decision maker or are otherwise regularly provided to the chief operating decision maker, even if not included in the measure of segment assets:
      1. The amount of investment in associates and joint ventures accounted for by the equity method; and
      2. The amounts of additions to non‐current assets other than financial instruments, deferred tax assets, net defined benefit assets and rights arising under insurance contracts. If the entity does not present a classified statement of financial position, non‐current assets are to be deemed those that include amounts expected to be recovered more than 12 months after the date of the statement of financial position.
   5. An entity shall provide an explanation of the measurements of segment profit or loss, segment assets and segment liabilities for each reportable segment. At a minimum, an entity shall disclose the following:
      1. The basis of accounting for any transactions between reportable segments;
      2. The nature of any differences between the measurements of the reportable segments' profits or losses and the entity's profit or loss before tax and discontinued operations (if not apparent from reconciliations as per Point 3 below);
      3. The nature of any differences between the measurements of the reportable segments' assets and the entity's assets operations (if not apparent from reconciliations as per Point 3 below);
      4. The nature of any differences between the measurements of the reportable segments' liabilities and the entity's liabilities operations (if not apparent from reconciliations as per Point 3 below);
      5. The nature of any changes from prior periods in the measurement methods used to determine reported segment profit or loss and the effect, if any, of those changes on the measurement of segment profit or loss; and
      6. The nature and effect of any asymmetrical allocations to reportable segments.
3. Reconciliations of the totals of segment revenues, reported segment profit or loss, segment assets, segment liabilities and other material segment items to corresponding entity amounts as follows:
   1. The total of the reportable segments' revenues to the entity's revenue;
   2. The total of the reportable segments' measures of profit or loss to the entity's profit or loss before tax expense (tax income) and discontinued operations. However, if an entity allocates to reportable segments items such as tax expense (tax income), the entity may reconcile the total of the segments' measures of profit or loss to the entity's profit or loss after those items;
   3. The total of the reportable segments' assets to the entity's assets if the segment assets are reported in accordance with Point 2 above;
   4. The total of the reportable segments' liabilities to the entity's liabilities if segment liabilities are reported to the entity's chief operating decision maker;
   5. The total of the reportable segments' amounts for every other material item of information disclosed to the corresponding amount for the entity.

IFRS 8 dictates that all material reconciling items are to be separately identified and described. For example, the amount of each material adjustment needed to reconcile reportable segment profit or loss to the entity's profit or loss arising from different accounting policies is required to be separately identified and described.

IFRS 8 also mandates that reconciliations of statements of financial position amounts for reportable segments to the entity's statement of financial position amounts be presented for each date at which a statement of financial position is presented. If, as is typical, comparative statements of financial position are presented, information for prior periods is to be presented.

If the reporting entity changes the structure of its internal organisation in a manner that causes the composition of its reportable segments to change, the corresponding information for earlier periods, including interim periods, is to be restated, unless the information is not available and the cost to develop it would be excessive. The determination of whether the information is not available and the cost to develop it would be excessive must be made separately for each individual item of disclosure—thus, a blanket conclusion regarding impracticability would normally not be appropriate. Following a change in the composition of its reportable segments, the entity discloses whether it has restated the corresponding items of segment information for earlier periods.

Furthermore, if the reporting entity has changed the structure of its internal organisation in a manner that causes the composition of its reportable segments to change, and if segment information for earlier periods, including interim periods, is not restated to reflect the change, it must disclose in the year in which the change occurs segment information for the current period on both the old basis and the new basis of segmentation, unless the necessary information is not available and the cost to develop it would be excessive. This requirement is expected to discourage frequent changes in structure affecting segment reporting.

EXAMPLE OF FINANCIAL STATEMENT DISCLOSURES UNDER IFRS

Roche Group

Annual Report 202X

Notes to the Consolidated Financial Statements

1. Summary of significant accounting policies

6. Segment information

(a) Information on reportable segments

Management has determined the operating segments based on the reports regularly reviewed by the chief operating decision maker (“CODM”) in making strategic decisions. Each operating segment is managed separately by a dedicated Chief Executive Officer and management team allowing management to maintain and develop the specific identity of each Maison. These operating segments have been aggregated into four reportable segments as follows:

• Jewellery Maisons—businesses whose heritage is in the design, manufacture and distribution of Jewellery products; these comprise Cartier and Van Cleef & Arpels;
• Specialist Watchmakers—businesses whose primary activity includes the design, manufacture and distribution of precision timepieces. The Group's Specialist Watchmakers comprise Piaget, A. Lange & Sohne, Jaeger‐LeCoultre, Vacheron Constantin, Officine Panerai, IWC, Baume & Mercier and Roger Dubuis;
• Montblanc Maison—a business whose primary activity includes the design, manufacture and distribution of writing instruments; and
• Other—other operations mainly comprise Alfred Dunhill, Lancel, Chloe, Net‐a‐Porter, Purdey, textile brands and other manufacturing entities.

The entire product range of a particular Maison, which may include jewellery, watches, writing instruments and leather goods, is reflected in the sales and operating result for that segment. The non‐separable costs of operating multi‐brand regional platforms are allocated to individual operating segments using allocation keys most relevant to the nature of the expense being allocated. Unallocated corporate costs represent the costs of the Group's corporate operations which are not attributed to the segments. Performance measurement is based on segment contribution before corporate costs, interest and tax, as management believes that such information is most relevant in evaluating the results of segments relative to other entities that operate within similar markets. Intersegment transactions between different fiscal entities are transacted at prices that reflect the risk and rewards transferred and are entered into under normal commercial terms and conditions. Intersegment transactions within the same fiscal entity are transacted at cost. All such transactions are eliminated in the reports reviewed by the CODM.

The segment results for the years ended March 31 are as follows:

An impairment charge of €2 million is included within the Other reportable segment for 202X (202X‐1: €1 million included within each of the Jewellery Maisons and the Other reportable segment). The segment assets which are reviewed by the CODM comprise inventories and trade debtors.

The CODM also reviews additions to property, plant and equipment and other intangible assets as follows:

(b) Information about geographical areas

Each reporting segment operates on a worldwide basis. External sales presented in the three main geographical areas where the Group's reportable segments operate are as follows:

Sales are allocated based on the location of the wholesale customer, the boutique or the shipping address for online transactions. The total non‐current assets other than financial instruments and deferred tax assets located in Switzerland, the Company's domicile, and the rest of the world are as follows:

Segment assets are allocated based on where the assets are located.

(C) Information about products

External sales by product are as follows:

(d) Major customers

Sales to no single customer represented more than 10% of total revenue. Given the local nature of the luxury goods wholesale and retail businesses, there are no major customer relationships.

Hays plc

Financial Year 201X

1. Segmental Information

Adoption of IFRS 8, Operating Segments

The Group has adopted IFRS 8, Operating Segments, with effect from July 1, 2009. IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker to allocate resources to segments and to assess their performance.

As a result, the Group continues to segment the business into three regions, Asia Pacific, Continental Europe & Rest of World, and United Kingdom & Ireland.

The Group's continuing operations comprise one class of business, that of qualified, professional and skilled recruitment.

Net fees and operating profit from continuing operations

The Group's Management Board, which is regarded as the chief operating decision maker, uses net fees by segment as its measure of revenue in internal reports. This is because net fees exclude the remuneration of temporary workers, and payments to other recruitment agencies where the Group acts as principal, which are not considered relevant in allocating resources to segments. The Group's Management Board considers net fees for the purpose of making decisions about allocating resources. The reconciliation of turnover to net fees can be found in Note 6.

The Group does not report items below operating profit by segment in its internal management reporting. The full detail of these items can be seen in the Group Consolidated Income Statement.

There is no material difference between the segmentation of the Group's turnover by geographic origin and destination.

US GAAP COMPARISON

The IASB and FASB converged their segment reporting guidance in 2009. Consequently, the standards are nearly identical, with the following exceptions:

1. Similar to IFRS, US GAAP requires an entity to provide a measure of assets that the chief operating decision maker uses in evaluating the performance of the segments. This includes expenditures on long‐lived assets (some are excluded). US GAAP excludes goodwill. IFRS does not.
2. US GAAP does not require disclosure of a measure of segment liabilities. IAS 8 requires disclosure of segment liabilities if such a measure is regularly provided to the chief operating decision maker.
3. A matrix organisation employs multiple management reporting relationships for the functions of people. US GAAP requires that an entity, with a matrix form of organisation to determine operating segments, is based on products and services. IFRS requires such an entity to determine operating segments by reference to the core principle of the IFRS.
4. US GAAP provides specific guidance for determining operating segments in certain circumstances (e.g., for equity method investees, certain corporate divisions and divisions that do not have assets allocated for internal reporting purposes).
5. The revenue recognition standard that was jointly issued by IFRS and FASB ASU 2014‐09 Revenue Contracts with Customers (Topic 606) have some minor definition changes though out Topic 280 Segment Reporting, that bring in to line the language to be consistent with the new revenue standard and are effective concurrent with the new revenue standard under which most companies are operating under using US GAAP.

In March 2017, the IASB proposed several changes to IFRS 8; the amendments clarify and emphasise the criteria that must be met before two operating segments may be aggregated and include the following disclosures not currently required under US GAAP:

1. With respect to the person or group that performs the function of the chief operating decision maker, companies are to disclose the title and role of the person or group; and
2. Requires disclosure when the segments reported in the financial statements differ from the annual report segments.

For contracts that are permitted to be settled in either common stock or cash at the entity's option, the presumption that the contract will be settled in ordinary shares if the effect is dilutive can be overcome if the entity has an existing practice or stated policy that provides a reasonable basis to conclude that the contract will be settled partially or wholly in cash.

Instruments that contain embedded conversion features that are contingently convertible or exercisable on the basis of a market price trigger are included in diluted earnings per share (if dilutive) regardless of whether the market price trigger has been met. The presentation of cash flow per share, or similar information, in the financial statements is specifically prohibited.