IFRS 8 operating segments

Segment reporting shows investors the business through management's eyes: which parts earn money, which lose it and where the assets sit. Because it follows internal reporting, no two companies' segment notes look alike. This guide explains who applies IFRS 8, how operating segments are identified and aggregated, works through the 10% and 75% tests for a group with five segments, and covers the disclosures, the 2024 agenda decision and how US GAAP compares.

By Hamza Fida, Chartered Accountant. Reviewed by Mirza Fahad Baig, Chartered Accountant. 4 minute read.

Short answer

IFRS 8 Operating Segments requires companies whose debt or equity is publicly traded to report information about their operating segments as management sees them. An operating segment is a component that earns revenues and incurs expenses, whose results are regularly reviewed by the chief operating decision maker to allocate resources and assess performance, and for which discrete financial information is available. The chief operating decision maker is a function, often the chief executive or an executive committee. Segments with similar economic characteristics and similar products, processes, customers, distribution methods and regulation may be aggregated. A segment must be reported separately if its revenue, its profit or loss, or its assets are 10% or more of the combined total, and reportable segments must together cover at least 75% of external revenue. For each reportable segment, the company discloses the measure of profit or loss the decision maker uses, assets and liabilities if they are regularly reported, and specified amounts such as revenue, depreciation and interest when they are included in that measure or regularly provided, as an agenda decision of July 2024 confirmed, with reconciliations to the financial statements. In this guide's example, four of five segments are reportable.

At a glance

Applies to
Listed companies
Based on
Internal reporting
Key person
Chief decision maker
Reportable if
10% of revenue, result
Coverage test
75% of external revenue
US GAAP
ASC 280, more expenses
IFRS 8 operating segmentsApplies to: Listed companies; Based on: Internal reporting; Key person: Chief decision maker; Reportable if: 10% of revenue, result; Coverage test: 75% of external revenue; US GAAP: ASC 280, more expenses.KEY FACTS AT A GLANCEIFRS 8 operating segmentsApplies toListed companiesBased onInternal reportingKey personChief decision makerReportable if10% of revenue, resultCoverage test75% of external revenueUS GAAPASC 280, more expensesTax BakersIFRS 8 operating segmentsApplies to: Listed companies; Based on: Internal reporting; Key person: Chief decision maker; Reportable if: 10% of revenue, result; Coverage test: 75% of external revenue; US GAAP: ASC 280, more expenses.KEY FACTS AT A GLANCEIFRS 8 operating segmentsApplies toListed companiesBased onInternal reportingKey personChief decision makerReportable if10% of revenue, resultCoverage test75% of external revenueUS GAAPASC 280, more expensesTax Bakers
Key facts at a glance, as set out in this guide.

Who must apply IFRS 8?

Companies whose debt or equity instruments are traded in a public market, or that are filing to issue them, in their consolidated financial statements or, for a single company, its separate statements. Others may apply it voluntarily, but then must comply fully. The standard's core principle is that a company discloses information that lets users evaluate the nature and financial effects of the business activities in which it engages and the economic environments in which it operates.

How are operating segments identified?

Is it an operating segment?Is it an operating segment?Does it earn revenues and incurexpenses from business activities?NoNot an operatingsegmentYesAre its results regularly reviewed bythe chief operating decision maker?NoNot an operatingsegmentYesIs discrete financial informationavailable for it?NoNot an operatingsegmentYesOperating segment: apply the tests
The tests follow the information management actually uses.

The chief operating decision maker is the function that allocates resources and assesses performance, not necessarily one person or someone with that title. Start-up operations can be segments before they earn revenue, while head office functions that earn only incidental revenue are not. Where management uses more than one set of information, as in a matrix organisation, the company uses judgement based on the core principle.

When can segments be aggregated?

Two or more operating segments may be combined if aggregation is consistent with the core principle, they have similar economic characteristics, such as similar long-term average gross margins, and they are similar in each of the following: the nature of products and services, of production processes, of customers, of distribution methods and, where relevant, of the regulatory environment. The judgements made in aggregating are disclosed.

IFRS 8 in practice: applying the 10% and 75% tests

A group has five operating segments that cannot be aggregated. External revenue totals CU 800 million. Profitable segments earned CU 95 million and loss-making ones lost CU 50 million, so the profit or loss threshold is 10% of the larger, CU 9.5 million. The revenue threshold is CU 80 million. All figures are in CU million.

SegmentRevenue% of totalProfit (loss)Reportable?
Retail40050.0%60Yes: revenue and profit or loss
Wholesale25031.2%30Yes: revenue and profit or loss
Online8010.0%(15)Yes: revenue and profit or loss
Services506.2%(35)Yes: profit or loss
Licensing202.5%5No

Retail, Wholesale and Online pass the revenue test; Services fails it but its loss of 35 exceeds the profit or loss threshold, so it is reportable too. Licensing is below every threshold and goes into an "all other segments" category. The reportable segments cover 97.5% of external revenue, above the 75% minimum, so no more segments need to be added. An asset test, at 10% of combined segment assets, applies as well.

What must be disclosed?

  • How the segments were identified, the products and services of each, and the judgements made in aggregating.
  • A measure of profit or loss for each reportable segment, and total assets and liabilities if these are regularly provided to the chief operating decision maker.
  • Specified amounts, such as external and inter-segment revenue, interest income and expense, depreciation and amortisation, material items of income and expense, and income tax, when they are included in the measure of segment profit or loss reviewed by the decision maker or otherwise regularly provided, even if not reviewed separately.
  • Reconciliations of segment totals to the financial statements.
  • In interim reports under IAS 34 interim financial reporting: segment revenue, the measure of segment profit or loss, and any material change in segment assets since the last annual report.
  • Entity-wide information, even for single-segment companies: revenue by product or service, revenue and non-current assets by country of domicile and material foreign countries, and reliance on any customer providing 10% or more of revenue.

The IFRS Interpretations Committee's July 2024 agenda decision confirmed the reading of the specified amounts in the third point, and that material items of income and expense are judged under the presentation standard. See IFRS 18 explained.

How does IFRS 8 compare with ASC 280?

The two are largely converged. ASU 2023-07 added US GAAP requirements to disclose significant segment expenses regularly provided to the chief operating decision maker, the decision maker's title, and full segment disclosures for single-segment companies, going further on expenses than IFRS 8. US GAAP does not require segment liabilities, and a matrix organisation identifies segments by products and services. See IFRS vs US GAAP key differences and ASC 280 segment reporting.

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Questions people ask

Who is the chief operating decision maker?

The function that allocates resources to and assesses the performance of operating segments, often the chief executive or an executive committee.

When is an operating segment reportable under IFRS 8?

When its revenue, its profit or loss, or its assets are 10% or more of the combined amounts for all operating segments, subject to the 75% external revenue test.

What is the 75% test in IFRS 8?

Reportable segments must together account for at least 75% of the company's external revenue; if not, more segments are reported until they do.

Do single-segment companies have IFRS 8 disclosures?

Yes. Entity-wide disclosures about products and services, geographical areas and major customers still apply.

Sources

Every fee, date and rule on this page was taken from these official and primary sources.

  1. IFRS Foundation: IFRS 8 Operating Segments
  2. IFRS Foundation: Disclosure of Revenues and Expenses for Reportable Segments (IFRS 8), agenda decision, July 2024
  3. BDO Australia: IFRIC agenda decision, disclosing revenue and expenses for reportable segments
  4. Financial Accounting Standards Board: Accounting Standards Codification

Rules and fees change. If you are reading this long after October 21, 2026, confirm the figures with the source before you rely on them.

IFRS 18IFRS 18 explained: what changes and whenIFRS 10IFRS 10 consolidation explainedAccounting standardsIFRS vs US GAAP: the key differences in one guide

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This guide is general information. It is not tax or legal advice for your situation.