The Impact of IFRS 8 on Segment Disclosure Practice: Panel Evidence from Italy

Abstract

The study examines the effectiveness of IFRS 8, effective since 2009, in relation to both the magnitude of segment disclosures and the firms' characteristics that might affect the disaggregated disclosure policies decisions, on Italian listed companies during the period 2008-2012.The results show that on average, the new standard did not lead to relevant changes in the segment disclosures as previously stated under IAS 14R, thus demonstrating inconsistency with the expectations of the IASB. In addition, we demonstrated, by employing a fixed-effect regression, that the magnitude of segment disclosure is negatively associated with growth rate, size, profitability and ownership diffusion.The present study contributes to the extant literature in terms of the PIR review, discussing the effectiveness of IFRS 8 some years after adoption, and not merely considering the first year, where the results may be affected by the learning curve effect in countries less familiar with Anglo-Saxon accounting.

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

“…However, it is also questionable whether IFRS only initially caused a greater impact when replacing the previous one, with a stagnation of its effects in later years. Lucchese and Di Carlo (2016), in particular, identified this effect.…”

“…Although minority ones, it is worth mentioning the identification of a negative and significant association -in opposition, therefore, to those mentioned above -in studies conducted by some researchers on the explanatory factors, such as the size, profitability, growth, level of capital dispersion, indebtedness and the level of presence in international exchanges (Lucchese and Di Carlo, 2016;Pardal, 2008;Pardal and Morais, 2011;.…”

“…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).…”

“…For instance, regarding the identification of the entity's chief operating decision maker, which was recently included as an obligatory requirement under IFRS 8, Franzen e Weißenberger (2015) e Nichols et al (2012) have identified about 30% of this information only, while Crawford et al (2012) and Kang and Gray (2013) above 60% and 80%, respectively. Also, the information on reconciliations is not fulfilled at a 100% level (Crawford et al, 2012;Lucchese & Di Carlo, 2016;Nichols et al, 2012).…”

“…Some explanatory factors can then contribute to the different levels of disclosure of information by segments observed in the entities. These elements may be related, in particular, to the characteristics of the entities, where agency and / or ownership costs play a parallel role in the explanation of the relations verified (Alfaraih and Alanezi, 2011, Bugeja et al, 2015, Herrmann and Thomas, 1996, Leung and Verriest, 2015, Lucchese and Di Carlo, 2016, Obradović and Karapavlović, 2016, Pardal, 2008, Pardal and Morais, 2011, Prater-Kinsey and Meek, 2004, Prencipe, 2004.…”