Advanced Business Finance and Accounting

Question: Discuss about the Advanced Business Finance and Accounting. Answer: Introduction: According to Picker et al., (2013), the IFRS 8 standard is for to those financial statements, which is applicable to entities, which are traded in public and seeking for any class of issuance of instruments, which are traded in public. The operating segment under the IFRS 8 is defined as the operating segment, which engages itself in the revenue earning business activities. It has been also stated that the chief operating decision maker regularly reviews the revenue earning related to the operating results. This is referred to as a function than a title as per IFRS 8 (Pardal et al., 2015). In order to consider the segments, which are reportable under this criterion, the total external components in the revenue with respect to the total entity of the company is taken into consideration. The report is intended to show the necessary application for this technique in a relevant NZX listed company. The company chosen for the application of this standard has been studied with Main freight Limited, based in New Zealand. The company is transportation and Logistics Company operating in Auckland. Then main operation of the firm is to deliver a pioneering domestic service in the logistics division. The operating segments are reported as per the IFRS 8 segmentation reporting in terms of the operating expenditure. NZ IFRS 8 requirements relating to reportable segments According to Nichols et al., (2012), The IFRS 8 of the operating segments became effective form 1st January 2009. It has shown the various parameters shown of the operating segments of the financial, segments of the financial, reports. The different types of the parameters to show the changes in the financial reporting include four sections. The first section shows the difference in IFRS 8 standards, which will replace IAS 14 standards of reporting. The second change in the IFRS reporting clearly shows the identification of reportable entities. It also contains example to illustrate the necessary standards for the application of this technique. The example for the purpose of this application of this technique is shown below as follow (Mardini et al., 2015). As per the IFRS 8 norms the external turnover is reported for only those operating segments, which has an identified operating size of less than 75% of the total entity, needs to be reported. The main criteria for the examples are related to the revenue proportion analysis in terms of the total entity. For example, the selection of the IFRS 8 criteria may involve the following consideration in the operating section Component External Revenue Internal Revenue Profit Assets 1 78000 Nil 12000 35000 2 Nil 40000 7000 32000 3 14000 Nil 2000 5000 4 9000 Nil 300 3200 5 3000 6000 400 4000 Total for the entity 104000 46000 21700 79200 In the above example, it can be seen that only component 1 and component 2 is to be selected for the separate reporting purpose. This is because the external revenue value in component 1 meets the criteria for threshold achievement of 75% as per the IFRS 8 reporting standards. It can be seen that the external revenue in the component 1 amounts to 78000/104000 = 75% of the total revenue component. Similarly the component 2 also has the accounted for 87% of the total internal revenue, hence this will be also selected for the purpose of separate reporting standards as per the IFRS 8 reporting standards. The rest of the components does not meet the essential, criteria, hence it cannot be included in separate report standards as per the specified guidelines (Leung Verriest, 2015). The third section related to the changes in the financial statement declaration as per IFRS 8 is related to the disclosures which differentiates from the IAS 14 norms includes several reporting components under the operable segments. The IFRS 8 framework provided the guideline for the reporting of the entities based on the general information, which is responsible for the identification from revenues derived from the reportable segments. Moreover, the disclosure should include the report for measuring of the profit and loss on the total assets for the individual, reporting segments. The IFRS 8 specifies the disclosures, which are needed to be reported for profit or loss and the amounts for the measuring of the profit and then loss on the total assets. These types of disclosure are related to the internal and external sector and revenue detail disclosure. The interest revenues and expenses must not be netted off in the disclosures sections. It needs to be included only if the chief op erating decision maker is able to assess the performance of the interest revenue (Kang Gray, 2013). The fourth section of the IFRS 8 guideline is responsible for providing answers about the frequently asked questions. New Zealand Listed Company analysis In the annual report of the selected company, Main freight Limited for the half-yearly ended 2016 and the financial year ending 2015, states the various aspects in the operating segmentation of the different components. The different types for the operating segments clearly stated in the annual report show the operational, segmentation in the foreign currency transaction, transactions and balances. The foreign currency transactions are based on the presentation of the currency, where each entity in the group is able to determine the functional currency and the items included in the financial statements. The various types of the transactions and the balances related to the foreign currency transactions are recorded initially in terms of the date of the transaction. The various types of the impairments are based on the disclosure of the recognition of loss and impairments (Mainfreight.com., 2016). The company is further responsible for the disclosure in the internal and external and re venue disclosure in form of the revenue declaration (Crawford et al., 2012). The company has further segregated the internal, external revenue source in form of the segregation of the information in separate operating columns as spark, digital, spark connect. Company is follows this standard in representation of operating segments at the end of each financial year. The disclosure of the information is also shown in form of the segregation of the profits and total of the profits in separate overheads. This is considered to be in followed as per the rulings followed by the IFRS 8 guidelines. Conclusion The report provided the necessary information on the changes in the IAS reporting standards to include the changes suggested in the IFRS 8 reporting standards. The various types of the information presented in this report show the necessary segments which identifies the several types of the reporting standards presentation in the IFRS 8 regulations. The study has been able put emphasis on the necessary changes made along with the relevant examples for the guidelines providing in the individual sections. The report deals with the putting stress on the several, types of the standards which are in line with the present market conditions. The selected company has been ideal, to shown then segmentation for individual reporting of the separate, operations segments which is responsible for showing the changes in then relevant sections as suggested in then IFRS regulations. Thought the several observation in disclosures in perspective of the New Zealand companies the main components selected for the disclosure has been seen in the area of internal revenue, external revenue and disclosure of the profits from the respective sectors. Reference List Crawford, L., Extance, H., Helliar, C., Power, D. (2012). Operating segments: The usefulness of IFRS 8. Edinburgh: ICAS. Kang, H., Gray, S. J. (2013). Segment reporting practices in Australia: Has IFRS 8 made a difference?. Australian Accounting Review, 23(3), 232-243. Leung, E., Verriest, A. (2015). The impact of IFRS 8 on geographical segment information. Journal of Business Finance Accounting, 42(3-4), 273-309. Mardini, G. H., Crawford, L., Power, D. M. (2015). Perceptions of external auditors, preparers and users of financial statements about the adoption of IFRS 8: Evidence from Jordan. Journal of Applied Accounting Research, 16(1), 2-27. Mainfreight.com.(2016). [online] Available at: https://www.mainfreight.com/Files/Downloads/Mainfreight%20Annual%20Report%202015.pdf [Accessed 19 Sep. 2016]. Nichols, N. B., Street, D. L., Cereola, S. J. (2012). An analysis of the impact of adopting IFRS 8 on the segment disclosures of European blue chip companies. Journal of International Accounting, Auditing and Taxation, 21(2), 79-105. Pardal, P., Morais, A. I., Curto, J. D. (2015). Competitive harm and business segment reporting under ifrs 8: evidence from european union listed firms. In EAA 38th Annual Congress. Picker, R., Leo, K., Loftus, J., Wise, V. J., Clark, K., Alfredson, K. (2013). Applying international financial reporting standards. Milton: Wiley.