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Strategic Business Reporting (International) · Analysis and interpretation of financial and non-financial information and measurement of performance

Segment Reporting and Performance Measurement under IFRS 8

Updated 11 October 2026 · Fact-checked

IFRS 8 requires certain entities to report financial information by operating segment, using the same measures the chief operating decision maker (CODM) uses internally. This is the management approach. You identify operating segments, apply the 10% quantitative thresholds and the 75% coverage test, then disclose profit, assets, and reconciliations.

Understand Segment Reporting and Performance Measurement (IFRS 8)

A group can run very different businesses. A single set of consolidated numbers hides this. A high-growth division and a declining one get blended into one profit figure. Segment reporting splits the totals so investors can see where profit, risk and growth come from.

IFRS 8 uses the management approach. You do not invent segments for the accounts. You report the segments the chief operating decision maker (CODM) reviews to allocate resources and assess performance. The CODM is a function, not always one person. It may be the board or an executive committee. The measures reported are the ones the CODM uses, even if they are not IFRS-compliant measures, as long as you reconcile them to the IFRS totals.

An operating segment is a component of an entity that earns revenues and incurs expenses (it may have inter-segment transactions), whose results are regularly reviewed by the CODM, and for which discrete financial information is available. Start-up operations can qualify. Corporate head office usually does not, as it does not earn revenue from normal activities.

Not every operating segment must be reported separately. A segment is reportable if it meets a quantitative threshold, or if you aggregate it with a similar segment, or if you choose to report it. Aggregation needs similar economic characteristics and similar products, processes, customers, distribution methods and regulatory environment. Small segments that are not reportable go into an 'all other segments' category.

In SBR, the question is rarely just 'which segments are reportable'. You are often asked how useful segment data is to investors, whether management is hiding poor performance by aggregating, or how the information helps you analyse risk. Link the numbers to the scenario and give a view.

Key rules to remember

Revenue threshold
Segment revenue (external + inter-segment) ≥ 10% × combined revenue of all operating segments
Meeting any one of the three 10% tests makes the segment reportable.
Profit or loss threshold
Absolute segment profit or loss ≥ 10% × the greater of (combined profit of all profitable segments) and (combined loss of all loss-making segments), in absolute amount
Compare the segment's absolute result with the larger of the two totals.
Assets threshold
Segment assets ≥ 10% × combined assets of all operating segments
Use segment assets as reported to the CODM.
75% coverage test
Total external revenue of reportable segments ≥ 75% of entity revenue
If not met, add more operating segments until it is, even if they fall below the 10% thresholds.
Practical limit
If the number of reportable segments exceeds ten, consider whether a practical limit has been reached
This is a guide in the standard, not a strict cap.
Entity-wide disclosures
Products and services, geographical areas, and major customers: where revenue from a single external customer is 10% or more of entity revenue, disclose that fact, the total revenue from each such customer and the segment(s) reporting it. The customer's name is not required.
Required even for entities with only one reportable segment.
Reconciliations
Segment totals of revenue, profit or loss, assets and liabilities (if reported to the CODM) are reconciled to the entity's IFRS amounts
Explain reconciling items such as head office costs and unallocated items.

How to solve Segment Reporting and Performance Measurement (IFRS 8) questions

Use this method for any IFRS 8 requirement, whether calculation, discussion or both.

  1. 1Read the requirement. Decide if you must identify segments, test thresholds, list disclosures, or evaluate usefulness.
  2. 2Identify the CODM and what it reviews. Segments follow internal reporting, not the legal structure or the published brochure.
  3. 3List operating segments. Corporate head office and post-employment benefit plans may not be operating segments, because they do not earn revenues or only earn them incidentally. Note any similar segments that may be aggregated.
  4. 4Run the three 10% tests for each segment. Mark each segment that meets at least one test.
  5. 5Apply the 75% external revenue test on the reportable segments. Add segments if short of 75%.
  6. 6State the disclosures: profit or loss measure, assets and liabilities if given to the CODM, items of revenue and expense, reconciliations and entity-wide data.
  7. 7Apply to the scenario. Comment on usefulness, comparability, consistency with the rest of the report, and any sign of management bias.
  8. 8Finish with a clear conclusion that answers the requirement, and note any professional judgement made.

Quickest way: 10%-75% threshold shortcut

When to use it: Use when the question gives a table of segment revenue, profit and assets and asks which are reportable.

  1. Total each column first: revenue, assets, and the larger of total profits or total losses (absolute).
  2. Multiply each total by 10% to get three cut-off figures.
  3. Tick each segment that is at or above any one cut-off.
  4. Add up the external revenue of ticked segments and compare with 75% of group external revenue.
  5. Write the result in one line per segment, with the figure that triggered the test.

Common mistakes in Segment Reporting and Performance Measurement (IFRS 8)

  • Using the legal entity or geographical structure as segments by default.

    Students think segments must match how the group is organised legally or how it appears in marketing.

    Fix: Always ask what the CODM reviews. Segments follow internal management reports.

  • Computing the profit test against total profit instead of the larger of combined profits and combined losses.

    The profit test is easy to oversimplify.

    Fix: Add profitable segments and loss-making segments separately, take the greater absolute amount, then apply 10%.

  • Stopping once the 10% tests are done and forgetting the 75% test.

    The thresholds feel like the end of the process.

    Fix: Always check the 75% external revenue coverage. Add segments if needed.

  • Insisting segment profit must follow IFRS measurement.

    Students assume all reported numbers must follow IFRS policies.

    Fix: IFRS 8 reports the measure the CODM uses, then requires reconciliation to the IFRS figures and an explanation of the basis.

  • Saying segment information is useful without evidence or applying it to the scenario.

    Students recite general benefits.

    Fix: Use the numbers: which segment drives profit, which has weak margins, where assets are tied up. Then note limits such as aggregation and non-IFRS measures.

  • Forgetting entity-wide disclosures.

    Students focus on reportable segment tables.

    Fix: Add products and services and geography to your list. Add major customers too: where revenue from a single external customer is 10% or more of entity revenue, disclose that fact, the total revenue from each such customer and the segment(s) reporting it, but not the customer's name.

Worked examples

Example 1

Alpha Group has four operating segments reviewed by its CODM. Revenue (all external) and results in $m: Retail: revenue 540, profit 90, assets 400. Online: revenue 300, profit 45, assets 180. Wholesale: revenue 120, loss (30), assets 90. Logistics: revenue 40, profit 5, assets 30. Identify the reportable segments.

Show the solution
  1. Totals: revenue = 540 + 300 + 120 + 40 = 1,000. Assets = 400 + 180 + 90 + 30 = 700.
  2. Profits of profitable segments = 90 + 45 + 5 = 140. Losses = 30. The greater is 140.
  3. 10% cut-offs: revenue 100, assets 70, profit/loss 14.
  4. Retail: revenue 540 ≥ 100, so reportable.
  5. Online: revenue 300 ≥ 100, so reportable.
  6. Wholesale: revenue 120 ≥ 100, so reportable. The absolute loss of 30 ≥ 14 as well.
  7. Logistics: revenue 40 < 100, profit 5 < 14, assets 30 < 70. It fails all three tests.
  8. 75% test: reportable segments' revenue = 540 + 300 + 120 = 960, which is 96% of 1,000. This is at least 75%, so no further segments are needed.

Answer: Retail, Online and Wholesale are reportable. Logistics is not reportable and is shown under 'all other segments' (unless management chooses to report it).

Example 2

Beta plc reports one consolidated profit and says 'our overall margin is strong'. Its segment note shows the Consumer segment makes 85% of operating profit and is flat in revenue, while the Digital segment is growing fast but has a small loss. An investor asks how the segment data helps them assess performance. Explain briefly.

Show the solution
  1. State the principle: IFRS 8 shows results through the CODM's eyes, so investors see how management views the business.
  2. Apply to Consumer: it produces 85% of operating profit but revenue growth is flat. Group profit depends heavily on one mature segment, so there is concentration risk.
  3. Apply to Digital: growth with a small loss may signal investment for the future. The investor can ask about margins, capital invested, and the route to profit.
  4. Show analysis: compare segment profit with segment assets to judge return on investment by segment, if assets are disclosed.
  5. Add limits: segment measures may not follow IFRS policies, costs may be allocated arbitrarily, aggregation may hide weak segments, and unallocated items are not attributed to individual segments. Segment figures are reconciled to entity totals, with material reconciling items separately identified and described.
  6. Conclude: segment data lets the investor challenge the headline 'strong margin' claim, but they should ask for more detail on allocation and the basis of measures.

Answer: Segment data shows that group profit relies on a flat Consumer business while Digital is loss-making but growing. It helps the investor judge risk, growth and returns by business area, though the investor must allow for management-defined measures, cost allocations and aggregation.

Exam tips

  • Show every threshold calculation with the cut-off figure. Marks are given for method even if one figure slips.
  • In discussion questions, link each point to the scenario numbers. Generic comments score poorly on professional skills marks.
  • Mention that IFRS 8 is the management approach and explain why it helps users see the business through management's eyes, then give a limitation.
  • Watch for hints of aggregation or hidden poor segments, and challenge them with scepticism.
  • Do not forget the 75% test, reconciliations and entity-wide disclosures when listing requirements.

Practice questions from Analysis and interpretation of financial and non-financial information and measurement of performance

Segment Reporting and Performance Measurement (IFRS 8) in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Segment Reporting and Performance Measurement (IFRS 8): frequently asked questions

What is the management approach in IFRS 8?

It means segments and measures are those the chief operating decision maker uses to allocate resources and assess performance. The entity reports what management actually reviews. It must reconcile segment totals to the IFRS financial statements.

What are the quantitative thresholds for a reportable segment?

A segment is reportable if its revenue, its absolute profit or loss, or its assets are at least 10% of the combined totals for all operating segments. The profit test uses the greater of combined profits and combined losses. The reportable segments must also cover at least 75% of entity external revenue.

Can a segment below the 10% thresholds still be reported?

Yes. Management can report it if it believes the information is useful to users. A segment may also be added to satisfy the 75% coverage test. It can also be aggregated with a similar segment if the aggregation criteria are met.

How does segment reporting help investors?

It shows where profit, assets and growth come from, and reveals concentration and risk. Investors can compare segment performance and trends. Its usefulness is limited when management aggregates segments or uses measures that differ from IFRS.