IFRS 8 - Segmental Reporting

Early this year, the biggest single body of investors, in the world’s largest IFRS-using capital market (the ABI, NAPF and IMA) objected to the European Union’s adoption of IFRS 8, the proposed standard for segmental reporting of companies. Read More

What is IFRS 8 ?

The IFRS requires an entity to adopt the ‘management approach’ to reporting on the financial performance of its operating segments. Generally, the information to be reported would be what management uses internally for evaluating segment performance and deciding how to allocate resources to operating segments. Such information may be different from what is used to prepare the income statement and balance sheet. The IFRS therefore requires explanations of the basis on which the segment information is prepared and reconciliations to the amounts recognised in the income statement and balance sheet. Click here to know more

The adoption of IFRS 8 is an ideal way of financial reporting ie. merging the traditional as well as management accountant thereby giving the readers of financial statement objective view of performance of the organisation. With this role of management accountants enhances with increased responsibility.

Although the reporting sounds great, the question is whether the Accounting systems are geared up to provide information i.e. how much investments in IT has to be made to provide P&L and Balance Sheet at the segment level ? Or will it be a case of paralysis by analysis !!!

Does the world's no.1 ERP Solution SAP provide segmental reporting ?

Yes. From Release E.C 5.0 has a facility called New GL that combines the approach of financials and management accounting. The reporting can be done by Segments and the business has to decide their segments.

During the implementation, many financial controllers ask why SAP has FI reporting is different to CO. Now for any green field implementation of SAP from Release EC 6.0, new GL has become mandatory.

SAP listens to the needs of the business.


Santosh Puthran

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