Equivalent to International Financial Reporting †MyAssignmenthelp

Question: Discuss about the Equivalent to International Financial Reporting. Answer: Introduction As per NZ IFRS 8 the operating segment is the entitys component that is involved in the business activities from which the company can earn revenue and make expenses, the operating result of which company is reviewed regularly by the chief decision maker regarding operation for making decisions regarding resources that requires allocation to segments and analyse the performance and for which the discrete financial data are available If the company produce more than one product or carries out the business in more than one country then the company must analyse performance of different products and future prospects of the products or geographical areas and report it separately to the financial statement. Generally the shareholders and potential investors are interested about the the performance of the company as their main motive is to maximize their investment. Reporting on various segments will assist them to assess the performance of different segments and take their decisions accordingly. Further, it reveals which product or segment is making profit and which needed to be discarded (NZ IFRS 8 XRB, 2018). Without proper information regarding different segments or products of the company the investors will take unreliable decision based on their knowledge and available news. However, all the products or segments are not reportable. Products or segments with more than or equal to 10% of total revenues, net profit or loss whichever is more or total assets are reportable. Segment reporting further assist the shareholders in True and fair view if the company reports about the products or segments separately it will enable the shareholders to get the information of revenue, expenses, assets or liabilities for each segment or products separately. It will further minimize the chances of manipulation of data and will therefore present the data in true and fair manner. It helps the user of the financial statement to take quality decisions that will be more judged with regard to vertical and horizontal division of the company (NZ IFRS 8 XRB, 2018). Risk assessment information regarding different segments or products of the company and their operation are known as segment information. This information is relevant for assessing the returns and risks of the multi locational or diversified products. This will not be possible from the consolidated statements. Further, it facilitates higher level of transparency for the financial information as the users of the financial statement will have more information regarding the operational activities of the company (New Zealand Equivalent to International Financial Reporting Standard 8 Operating Segments (NZ IFRS 8), 2018). Investment and credit decisions segment reporting enable the shareholders to analyse uncertainties of amount and timing of the expected cash flows in better way and therefore, risks associated with providing loan to the company or investing in the company can be analysed better (NZ IFRS 8 XRB, 2018). Profitability analysis as per the given information, diversified Ltd has various product segments like timber, steel and cardboard. All product segments differ on profit, level of risk, potential growth and operational aspect. Therefore, the shareholders will be better informed and can analyse the profitability of different products in better way (New Zealand Equivalent to International Financial Reporting Standard 8 Operating Segments (NZ IFRS 8), 2018). The segment is reportable if it fulfils any of the 3 criteria mentioned below The reported revenue of the segment inclusive of intersegment transfers or sales as well as sales to the external customers is equal to or more than 10% of combined revenue of all the operating segments (NZ IFRS 8 XRB, 2018). Absolute amount of the reported loss or profit is equal to or more than 10% of greater in the absolute amount of combined reported profits or loss of all the segments whichever is more Assets of the segment are equal to or more than 10% of combined assets of all the operating segments (NZ IFRS 8 XRB, 2018). As per the given information Segment Revenue Segment Profit Segment Assets ($m) ($m) ($m) Timber 800 75 900 Steel 100 25 420 Cardboard 60 (15) 180 Total 960 85 1,500 10% of combined revenue = $ 960 m *10% = $ 96 m 10% of reported total profit = $ 85 * 10% = $ 8.5 m 10% of combined assets = $ 1500 m * 10% = $ 150 m Revenue approach timber segment and steel segment shall be reported as their revenue is more than 10% of combined revenue that is 960 *10% = 96. Profit approach timber segment and steel segment shall be reported as their profit is more than 10% of combined profit that is 85 *10% = 8.5. Net asset approach - timber segment, steel segment and cardboard segment all are reportable as their asset is more than 10% of combined assets that is 1500 *10% = 150. Therefore, all the segments are reportable as per the requirement of NZ IFRS 8 as the timber and steel segment fulfils all the 3 criteria and cardboard segment fulfils net asset approach criteria management. Reference New Zealand Equivalent to International Financial Reporting Standard 8 Operating Segments management (NZ IFRS 8). (2018). New Zealand. Retrieved from https://file:///C:/Users/user00/Downloads/NZ-IFRS-8-Jul14-158179.2.pdf NZ IFRS 8 XRB. (2018). Xrb.govt.nz. Retrieved 9 April 2018, from https://www.xrb.govt.nz/accounting-standards/for-profit-entities/nz-ifrs-8/