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Could you please explain me on what is Asymmetric allocation in IFRS 8 – With respect to Interest and Interest-bearing Assets – (BPP Revision kit – question 47 Operating segments)
Never heard the jargon before.
But – I suspect that the learning point is that companies can distort their segmental results by allocating interest in an unfair way.
If Division A and B each have PBIT of 5, and the interest charge is 6, management might choose to deduct all the interest from Division A (if they want to show that division in a bad light).
Thanks for the reply sir, that helps :).
But i have further doubt in this, in the text they have given in this way as an explanation of how to apportion the interest and interest-bearing assets, “These need not be allocated to the same segment- Interest receivable could be allocated to the profit or loss of one segment and related interest-bearing assets to the assets and liabilities. IFRS 8 calls this is called as asymmetric allocation”
Could you please explain the stance that they like to convey here?
Because from my understanding they say that the allocation need not be made to specific segment but shouldn’t it be another way around (i.e allocation to be made to only to the segment which issued the interest-bearing security)?I think that what is being highlighted is a criticism of IFRS 8. Companies are inconsistent in their application of the standard which causes major problems with comparability.
If I was doing the accounts I would want to allocate costs etc to individual segments…… but others may not.
IFRS 8 requires disclosure of asymmetric allocations .. but I’m not sure that is very helpful.
For more detail refer to iasplus website.
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