IAS 14

As issued in 1981, IAS 14 required a company to disclose revenue, results (profit) and total assets for both geographical and industry segments. Although it provided only limited guidance on segment identification, its disclosure requirements went further than national requirements in a number of countries.^[4]

In 1992, a process to revise IAS 14 began. The main question was whether the standard should focus on comparability of segment numbers across reporting companies, and thus on standardization, or whether the focus should be on providing the most relevant company-specific information. In the latter case, the guiding principle is that segment reporting should be based on the information as provided to a company's management, also known as the 'management approach' or the 'through-the-eyes-of-management' principle. At the time IAS 14 was revised, the US Financial Accounting Standards Board adopted the management approach. In the revised IAS 14, the IASC adopted a limited version of the management approach: segment identification should follow the internal reporting structure, but with additional requirements to guarantee a minimum number of reportable segments. Regardless of whether a company reported internally along both industry and geographical lines, the segment disclosures should include both, although one of the two perspectives could be classified as secondary, with lower disclosure requirements. In another departure from the management approach, IAS 14 required that segment numbers should be based on the accounting policies used in the consolidated financial statements, although additional numbers based in internal reporting practices might be added.^[5]

IFRS 8 represents a shift by the IASB to the management approach. In IFRS 8, segment identification and the definitions of segment numbers are based on information as reported to the entity's top management ('chief operating decision maker'), with some requirements of minimal disclosures by segment. Reported segment income statement numbers should be reconciled to their closest counterpart in the consolidated income statement, to show the effect of different accounting policies used in segment reporting and the consolidated financial statements, as well as any unallocated corporate income and expense items.^[6]