The objective of segment reporting is to provide information on the principal business areas of an entity and on its related activities, in order to give a better insight into the financial position and performance of the separate segments and therefore into the corresponding risks and returns.
The Standard applies to all parent entities which present segment information in accordance with section 297 (1) sentence 2 of the HGB as a component that may supplement their consolidated financial statements. Other entities that disclose segment information voluntarily are encouraged to comply with this Standard.
An entity shall report segment information on the basis of its business segments. These are derived from the internal organisational and reporting structure of the entity, whereby it is assumed that the structure will reflect the various risks and returns of the activities of the entity.
If an entity has more than one potential basis for determining segments, then management shall select the basis which best reflects the structure of risks and returns. Segments with substantially similar risks and returns may be combined.
A business segment is always a reportable segment if revenue from external customers and other segments, the segment result or the segment assets are 10% or more of the total amount for the entity.
The decision tree for reportable segments is presented in the graphic in Appendix 1.
Segment information must be prepared consistently with the accounting policies used in the consolidated financial statements. The assets and liabilities disclosed for segments must correspond to the income and expenses disclosed for those segments. The segment result can be defined by management, if appropriate, after consideration of industry-specific matters.
Segment information shall be reconciled with the corresponding disclosures in the consolidated financial statements.
Entities are encouraged to disclose comparative figures for the previous period.
The notes to the financial statements shall contain a description of the basis used for determining segments and shall give details of any combinations.
The activities of reportable business segments shall be described. The allocation of products to each segment shall also be described. The basis for geographical segments shall be explained.
If revenues from sales to a single external customer are 10% or more of total revenue from sales to external customers and to other segments, then the full amount and the segment involved shall be disclosed.
The Standard contains sector-specific requirements for segment reporting by credit and financial services institutions (Appendix 2) and by insurance undertakings (Appendix 3).