1. Annual Report: Additional Financial Statements
4.1
Chapter 4
Annual Report: Additional Financial Statements

2. By the end of this chapter, you should be able to:
discuss the value segmental information adds to published financial statements;
understand and evaluate the structure and content of Segmental Reports and discuss the major provisions of IFRS 8 Operating Segments;
explain the criteria laid out in IFRS 5 Non-current assets held for sale and discontinued operations that need to be satisfied before an asset (or disposal group) is classified as ‘held for sale’;

3. explain the accounting significance of classifying an asset or disposal group as ‘held for sale’;
explain the meaning of the term ‘discontinued operations’ and discuss the impact of such operations on the statement of comprehensive income;
identify Related Parties in accordance with IAS 24.

4. Segment reporting
IFRS8 requires a management approach to segment reporting – i.e the identification of operating segments is based on the internal reports regularly reviewed by the entity’s chief operating decision maker (CODM) in order to allocate resources to the segment and assess its performance.

5. Segment reporting - IFRS 8
Attempts to provide investors with the information provided to management
It is specific to the organisation
It is more difficult to make inter-company comparisons because of differences in the ways in which companies compile/use these reports.

6. Criteria for identifying a segment
4.1
Criteria for identifying a segment
An operating segment is a part of an entity:
Discrete financial information has to be available
That engages in
business activities from
which it may earn
revenues and incurexpenses
Whose operating results are regularly reviewed by the entity’s chief operating decision maker (CODM)

7. Criteria for reporting a segment
4.1
Criteria for reporting a segment
A reportable segment is one that meets any of the following criteria
Its assets are 10% or more of the combined assets of all operating segments.
Its reported revenue, from internal and external customers, is 10% or more of the combined revenue (internal and external) of all operating segments or
Its reported profit or loss is 10% or more of the greater of
(i) The combined profit of all operating segments that did not report a loss and
(ii) The combined reported loss of all operating segments that reported a loss or

9. Which divisions are reportable segments?
Divisions Revenue Profit Assets £000 Exam-based Training E-Learning Corporate Training Print Media Online Publishing Cable TV

10. Which divisions are reportable segments?
Divisions Revenue Profit Assets
£000
Exam-based Training 360* * 176*
E-Learning
Corporate Training 125* *
Print Media 232* * 102*
Online Publishing 124*
Cable TV
* = meets 10% requirement.
Therefore, E-Learning and Cable TV are not segments.

11. Which divisions are reportable segments?
Does the total revenue from these reporting segments equal at least 75% of the company’s total revenues?
Revenue Profit Assets
Exam-based Training 360* * 176*
Corporate Training 125* *
Print Media 232* * 102*
Online Publishing 124*
841
841/974 = 86%
Therefore, the 75% test is met, so no other segments need to be identified or added

12. Operating segment disclosure
4.1
Operating segment disclosure
IFRS 8 requires detailed disclosure of “information to enable users to evaluate the nature and financial effect of the business activities in which it engages and the economic environment in which it operates”

13. Discontinued operations IFRS 5
4.1
Discontinued operations IFRS 5
A discontinued operation is one that has either
been disposed of, or is classified as held for sale
Is part of a single coordinated plan to dispose of a separate major line of business, or geographical area of operations, or is a subsidiary acquired exclusively with a view to resale.
Represents a separate major line of business or geographical area of operations

14. Held for sale definition IFRS 5
4.1
Held for sale definition IFRS 5
A discontinued operation is one that has either
It must be available for immediate sale in its present condition and its sale must be highly probable.
Held for sale assets should not be depreciated from the classification date
be classified on the Balance sheet as a “held for sale” item – usually as part of current assets
If the carrying amount will be recovered principally through a sale transaction rather than through continuing use and

15. Held for sale definition IFRS 5
4.1
Held for sale definition IFRS 5
Highly probable criteria
Management must be committed to a plan to sell
An active programme started to locate a buyer
Actively marketed for sale at a price that is reasonable in relation to current fair value
Sale should be expected to be completed within a year
It is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.

16. PRESENTATION AND DISCLOSURE
4.1
PRESENTATION AND DISCLOSURE
The results of continuing and discontinued operations should be disclosed separately
It is necessary to identify the revenue, cost of sales and expenses that relate to the discontinued operation in arriving at the operating profit.

17. 4.1
Arm’s length transactions
Related party relationships may mean transactions have not been entered into on an arm’s length basis
It is necessary to The Objective of IAS 24 Related Party disclosures
Draw attention to the fact results may have been affected by transactions with related parties.

18. as defined by IAS 24
Where one party has direct or indirect control of the other party or
The parties entering into a transaction are subject to such influence from the same source that one party has subordinated its own separate interests.
One party has such influence over the financial and operating policies of the other party that the other party might be inhibited from pursuing its own separate interests or

19. .
Disclosures required of:
The person controlling the reporting entity and
Related party transactions such as
Purchase or sale of goods, property or other assets
Giving or receiving services
Agency arrangements, leasing arrangements
Transfer of research and development, licence agreements
Provision of finance and management contracts

20. Disclose relationships – even if no transactions
Disclose if there have been transactions
Nature of relationship
Types of transactions
Commercial detail – volumes, pricing policy.

21. IAS 24 – not deemed to be related parties
Two companies with a director in common
However consider extent of his interest
Providers of finance, unions and government when in course of normal dealings with the entity
Single customer, supplier simply based on volume of business.

22. Reference Elliott, Barry, Elliott Jamie,
Financial Accounting and Reporting
15th Edition chapter 4