An Analysis of the Impact of Adopting IFRS 8 on the Segment Disclosures of European Blue Chip Companies

Journal of Internal Accounting, Auditing and Taxation 21 (2012) 79-105

27 Pages Posted: 28 Feb 2013

See all articles by Nancy B. Nichols

Nancy B. Nichols

James Madison University - College of Business

Donna L. Street

University of Dayton - Accounting

Sandra J. Cereola

James Madison University - School of Accounting; Virginia Commonwealth University (VCU) - Department of Accounting

Date Written: July 1, 2013

Abstract

Amidst the IASB’s post-implementation review of IFRS 8, we examine how the standard’s adoption changed the reporting of segments by European blue chips (i.e. companies comprising the top tier index of 14 European stock exchanges). We focus on anticipated benefits articulated in the IASB’s Basis for Conclusions and concerns expressed by IFRS 8 opponents.

In addition to convergence with U.S. GAAP, IFRS 8 results in the reporting of significantly more operating segments on average. However, most companies report the same number or fewer segments. Refuting claims regarding the loss of geographic data at the entity-wide level, we identify an improvement in the fineness of disclosures and a significant increase in the disclosure of geographic groupings. We do not identify an improvement in consistency of segment disclosures with other sections of the annual report, which is due to the consistency already achieved under IAS 14R.

IFRS 8 results in a significant decline in the number of reportable segment information items (notably liabilities) and a significant decline in the reporting of capital expenditures at the entity-wide level. Furthermore, adoption of the standard produces a lack of comparability in segment profitability measures and extensive reporting of non-IFRS measures. However, almost all companies report a measure of segment profitability tied to a number on the consolidated income statement or reconciled to the income statement.

Keywords: IFRS 8, segment reporting, IASB post-implementation review, SFAS 131, convergence

Suggested Citation

Nichols, Nancy B. and Street, Donna L. and Cereola, Sandra J., An Analysis of the Impact of Adopting IFRS 8 on the Segment Disclosures of European Blue Chip Companies (July 1, 2013). Journal of Internal Accounting, Auditing and Taxation 21 (2012) 79-105 , Available at SSRN: https://ssrn.com/abstract=2224579

Nancy B. Nichols (Contact Author)

James Madison University - College of Business ( email )

Harrisonburg, VA 22807
United States

Donna L. Street

University of Dayton - Accounting ( email )

Dayton, OH 45469
United States

Sandra J. Cereola

James Madison University - School of Accounting ( email )

Harrisonburg, VA 22807
United States

Virginia Commonwealth University (VCU) - Department of Accounting ( email )

Richmond, VA 23284
United States

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