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

Under IFRS 8 Operating Segments, which of the following best identifies an operating segment of Zentar Group?

An operating segment is a component of the entity whose results are regularly reviewed by the chief operating decision maker to allocate resources and assess performance, and for which discrete financial information exists. IFRS 8 follows the management approach, so internal reporting, not legal structure or geography, drives identification.

  1. AAny business component whose operating results are regularly reviewed by the chief operating decision maker (CODM) to allocate resources and assess performance, and for which discrete financial information is availableCorrect
  2. BAny geographical area in which Zentar Group sells goods, regardless of how management reviews results
  3. CAny subsidiary included in the consolidated financial statements, whether or not its results are reviewed separately
  4. DAny product line that contributes more than 5% of consolidated revenue

Explanation

IFRS 8 uses a management approach. An operating segment earns revenues and incurs expenses, has results regularly reviewed by the CODM for resource allocation and performance assessment, and has discrete financial information. Legal entity structure, geography or a revenue percentage alone does not define a segment; the 5% figure is a quantitative threshold applied only after segments are identified.

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