Segment Reporting: Is IFRS 8 Really Better?

Abstract

This paper contributes to the debate on segment reporting standards in the UK and Europe and, specifically, the merit of IFRS 8 relative to predecessor standards (SSAP 25 and IAS 14R). We carry out a longitudinal analysis of segment reporting practices of a large sample of listed UK companies, covering all three reporting regimes. Using the Proprietary Cost Theory (PCT) as our theoretical lens, we present evidence consistent with PCT, that proprietary costs considerations influence companies' segment disclosure choices. We show that when companies are required to disclose more detailed accounting information for geographical segments (e.g., when geography is the basis of operating segments, under IFRS 8, or primary segments, under IAS 14R), they choose to define geographical segments in broader geographic areas terms than was the case under SSAP 25. We find that although companies disclose greater quantity of segmental information under IFRS 8 and IAS 14R (than SSAP 25), the more recent standards brought about a notable reduction in (i) the level of specificity of the disclosed geographical segments, and (ii) the quantity of disclosed geographic segment profit dataone of the most important data types for users. While this may have reduced the proprietary costs of segment disclosures, the reduction in disclosure of segmental performance data may have reduced the usefulness of segment reports to investors.

Los factores explicativos de la divulgación por segmentos en entidades no financieras cotizadas en los mercados europeos

“…The results of the entities from Portugal and the Nordic countries are the ones that most resemble the results obtained in the literature in general. Those from France are similar to the results obtained by Aleksanyan and Danbolt (2015) and Nichols et al (2012). The entities of Germany are the ones that present better results, surpassing those identified in the analyzed literature on the subject.…”

“…Considering the entities with multiple operating segments, the number increase slowly, from 4.31 (total sample) to 4.54, with a minimum value of 2 and a maximum of 12. In turn, the number of operating segments by products and or services, geographical areas and both were 2.91, 1.14 and 0.49, which are closer to the findings from Aleksanyan and Danbolt (2015) and Nichols et al (2012).…”

“…In summary, with the introduction of IFRS 8, the entities started to disclose more segments, but less information items by segment (Aleksanyan and Danbolt, 2015, Bugeja, Czernkowski and Moran, 2015, Crawford, Extance, Helliar and Power, 2012, Franzen and Weißenberger, 2015, Kang and Gray, 2013, Leung and Verriest, 2015, Lucchese and Di Carlo, 2016, Nichols, Street and Cereola, 2012, Pardal, Morais and Curto, 2015. Geographic areas are also becoming more specific, but there seems to be less information released for each of these types of segments (Aleksanyan and Danbolt, 2015, Crawford et al, 2012, Franzen and Weißenberger, 2015, Leung and Verriest, 2015Nichols et al, 2012).…”

Desempeño económico de la mayor empresa de servicios educativos del mundo: un estudio de Kroton Educativa con base en sus segmentos operativos

“…Ao efetuar uma revisão de literatura na que se abrangeram artigos cientícos disponíveis em algumas das principais bases cientícas internacionais (Web of Science, Science Direct e Scopus), observa-se que estudos como Crawford, Helliar e Power (2016); Crawford, Ferguson, Helliar e Power (2014); Moldovan (2014) e Katselas, Birt e Kang (2011) permitem uma compreensão sobre o processo de criação das normas sobre segmentos operacionais em diferentes países, a evolução destas ao longo do tempo e as diferenças entre normas utilizadas em diversos contextos ou em diferentes momentos. Garza-Gomez, Dong e Yang (2015), Franzen e Weißenberger (2015), Aleksanyan e Danbolt (2015), Kang e Gray (2014) e Street e Nichols (2002) evidenciam que não há uma padronização das informações por segmentos que são divulgadas pelas empresas. Isto ocorre porque cada empresa tem a liberdade de denir seus critérios de divulgação e estes critérios devem ser aderentes às diferentes características gerenciais da respectiva companhia.…”

“…A norma adota o critério da abordagem gerencial (management approach) para a divulgação de informações. De acordo com essa abordagem, a segmentação deve reetir os mesmos critérios utilizados na contabilidade gerencial de cada instituição e estar de acordo com políticas contábeis e formas de divulgação internas (Aleksanyan e Danbolt, 2015;Bugeja, Czernkowski e Moran, 2015).…”