September 14, 2020 at 2:37 am #585492
Hi there, I hope you’re well.
I just had a follow up query with regard to my previous question regarding reconciliations in IFRS 8. Fortunately I have almost entirely completed my revision with regard to the standard, thanks to the support you have given me, and the lecture(s) provided by OpenTuition on it.
Unfortunately, I’ve come to a bit of a standstill at the same part, reconciliations. I understand how they work and what purpose they serve, but I can’t seem to understand how exactly the reconciliation for PBT of a business’s segments work.
For reference, here’s an example as provided by KPMG:
Pages 18, 19 and 20. (I’ve only attached this link for reference to the structure and layout)
The reconciliation provided within the notes is exactly as structured within the illustrative example created by the IASB, but I can’t seem to figure out how exactly they were able to calculate inter-segment profits using the data above.
I have tried various methods, such as taking the inter-segment revenue as a percentage of total revenue, then multiplying it by segmental profits, but have been unable to determine how the figure for inter-segment profits has been obtained. I also had the same issue with the IASB illustrative document on IFRS 8.
Given that reconciliations play a key role within the standard, is there any particular guidance provided as to how exactly we can calculate inter-segment profit?
Thanks in advance.
September 14, 2020 at 3:15 pm #585568
In practice I guess you would have to look at the individual accounts of each company in the group.
As stated before what you are likely to be asked is interpretation.
September 14, 2020 at 10:06 pm #585630
I see, so in this instance would it be the intersegment expenses that are the missing piece to determine intersegment profits, given that we are told the intersegment revenues?
And I apologise for the question being off-course, thank you for helping me nonetheless.
September 15, 2020 at 6:31 am #585652
To be honest inter-segment revenues would be the last thing they would worry about. More likely, segment identification and common costs.
September 15, 2020 at 10:22 pm #585787
Got it, thanks Stephen 🙂
September 16, 2020 at 4:42 pm #585854
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