Audit Services in UAE Overview of IFRS 8 Principles

AUDIT SERVICES IN UAE : AN OVERVIEW OF IFRS 8 PRINCIPLES https://audit-firms-in-dubai.com/

AIMS OF IFRS 8 The core principle of IFRS 8 sets out its objective. Users of an entity’s financial statements should evaluate the nature and financial effects of the business activities in which they engage and the economic environment they operate in by disclosing relevant information.

Operating segments are determined according to an organization’s structure and how management receives information. Information to be disclosed under IFRS 8 is not measured. Information presented to management determines a lot of the amounts declared. Alternatively, this is referred to as observing things through management’s eyes.

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SCOPE OF IFRS 8 FRS 8 only requires disclosures from entities that fall within its scope. Nevertheless, other entities may require the identification of operating segments following IFRS 8 to comply with different standards.

Identifying entities within IFRS 8’s scope Entities preparing financial statements are subject to IFRS 8 Stocks or bonds that are publicly traded Securities commissions or other regulatory organizations that file or are in the process of filing financial statements regarding the issuance of any instrument in the public market. The same applies to consolidated financial statements of a group with a parent company and separate financial statements of a specific company.

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SCOPE OF IFRS 8 According to IFRS 8, a ‘public’ market includes over-the-counter markets.

It also states that IFRS 8 does not apply to parent entities that do not have publicly traded securities, even if they invest in another entity that has issued listed securities. According to IFRS 8, segment information is only required in the consolidated financial statements of a parent company covered by IFRS 8.

The segment information may be disclosed by entities outside the mandatory scope of IFRS 8. The entity must not refer to this information as segment information if it reveals segments that do not comply fully with IFRS 8. The disclosures should have a different heading.

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IFRS 8 IMPACTS ENTITIES IN AND OUTSIDE THE SCOPE OF THE STANDARD The guidance states that even though entities outside of the scope of IFRS 8 are not subject to its disclosure requirements, they must still identify operating segments to allocate goodwill or mineral exploration and evaluation assets to cash-generating units (CGUs) or groups of CGUs. IFRS 8 describes how segments are identified or identified per other standards. Certain entities covered by IFRS 8 may not need additional disclosures relating to elements. Components are also included in different standards in certain situations, even for entities outside IFRS 8.

As part of a future article, we will look at the interaction between IFRS 8 and other standards and the additional requirements of other IFRS for entities covered by IFRS 8.

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