Component vs operating segment

A component as an auditing terms comes from ISA 600 https://www.accaglobal.com/lk/en/student/exam-support-resources/professional-exams-study-resources/p7/technical-articles/group-auditing.html

A component is “a division, branch, subsidiary, joint venture, associated entity or other entity whose financial information is included in the financial statements audited by the principal auditor”.

An operating segment is a financial reporting term from IFRS 8:
“An operating segment is a component of AN ENTITY:
that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity) whose operating results are reviewed regularly by the entity’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance and for which discrete financial information is available.”

ISA 600 applies only to all group audit scenarios – IFRS 8 applies to LISTED entities. If the parent in a group scenario is not listed, IFRS 8 does not apply.

A subsidiary of a listed entity would be a component per ISA 600 – it may also be a reportable segment that requires disclosures in the consolidated financial statements of its parent – as long as it meets the IFRS 8 criteria.

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