Under AASB 114, financial report’s segment reporting of an entity should to separated into two main sections: business segments and geographical segments. Business segment is a distinguishable component in an entity that differentiate with others with their similar nature of products or services, production processes, class of customers, production or distribution of products and potentially regulatory environment. Geographical segment is another distinguishable component which location has similar economic and political conditions; relationships in operations; proximitiy; any other risks such as regulatory risks, currency risks etc.
As a large organisation may often have hundreds of business segments, what was the standard to for the grouping of business segments? Quantitative thresholds Under this previous accounting standard, two or more business segments or geographical segments that had a great similarity can be grouped into a reportable segment. A reportable segment should have at least 10% revenue, 10% profit and 10% assets of all segments. AASB 8 As AASB 8 adopts different principles in segment reporting,
Instead of business segments, the new building blocks to form reportable segments in reports is called operating segments. Operating segments are slightly different from business segments in nature and standard. It is a component of an entity that 1. Incurs revenues and expenses 2. Has operating results that regularly review by entity’s chief operating decision maker 3. Separate financial information is available. To demonstrate the difference of number of reportable segments between AASB 114 and AASB 8.
The Essay on Segmenting Business Markets
In this lesson, we will discuss concepts and applications related to Business to Business (B2B) market segmentation. Market segmentation involves breaking down a large heterogeneous market into smaller homogeneous markets. Separate marketing programs – the marketing mix - can then be developed to meet the needs of each segment. Concentration of marketing solutions is the key component of all ...
We have compared segment reports of 2009 (which was using AASB 114) and 2010 which has already adopted AASB 8 for both Qantas and Woolworths. Woolworths Under AASB 114, there were 5 business segments in segment reporting in stated in 2009’s annual report: supermarket group, general merchandise group, consumer electonics group, hotels group, wholesale group. In 2010 when AASB 8 was adopted, the number of reportable segments in woolworths increased from 5 into 6 segments, by removing 2 segments: general merchandise and wholesale group and adding in 3 new segments: Australian food and liquor, petrol and Big W.
Comparing to the 2009’s business segments, the new operating segments clearly demonstrated 6 different types of products or services provided by Woolworths and which are sensible to be managed by individual segment manager. This approach does not merely facilitates the company in a way of the synchronization with the internal reports, it also helps investors to understand more about the nature of business in Woolworths and its performance. Qantas In 2009 and 2010, Qantas used exactly the same 5 reportable segments: Qantas, Jetstar, Qantas freight, Qantas frequent flyer and Jetset Travelworld Group.
That may possibly means these segments are suitable for both accounting standard and matched internal reporting purposes. For this reason, more years of annual report have been used to validate the above presumption. In 2013, Qantas segment have been separated into Qantas domestic and Qantas International. Together with Qantas loyalty and Qantas freight, there formed the 4 Qantas segments. The second segment Jetstar group standalone as a separate segment. Therefore, Qantas remains with 5 operating segments throughout the recent few years with slight changes of component and segment grouping. Quantitative thresholds
Quantitative thresholds are very similar in the two accounting standards. Section 6 ‘some functional departments may not earn revenues………………would not be operating segments.. ’ Geographical areas As AASB 8 is now more flexible in the geographical segments, it is no more a requirement to report every distinct geographic area if resources is not allowed. As Qantas is a airline business, it is likely that for Qantas to have business in a various locations. While adopting previous accounting standard, Qantas had 7 geographical regions for reporting purposes: Australia, UK and Europe, Japan, Asia, US and Pacific, New Zealand, and other regions.
The Term Paper on The Relationship Between Business Ethics and Customer Relations
The relationship between business ethics and customer relations lies in the manner in which the management of various businesses apply the principles of ethics in their interaction with customers. As such, business ethics and customer relations may apply to the way in which a business conveys its products and services to customers and the manner in which it handles customer complaints. It also ...
In 2010 and 2011, the first two year of adopting AASB 8, there are no sections of geographical segments available in its annual report. It is possibly due to the fact that there is an excessive cost to generate the information and the chief operation decision make decided to eliminate this section. For Woolworths geographicall information, the segments remains the same: Australia and New Zealand under the two different accounting standard. Even though the annual report in 2010 stated that it has business in India and Hong Kong, it may not be a substantial part of operation and has not been included in the segment report. Major Customer
major customer is a new segment which didn’t exist in AASB 114. AASB 8 stated that if a single customer contributes to at least 10% of an entity’s total revenue, it is a major customer. For Qantas’s business nature and size of organisation, it is reasonable not to have a single customer that contributes to at least 10% of the business’s revenue, therefore the major customer segment doesn’t exist in segment reporting. At the same time, Woolworth runs mainly retail business. It is expected to not have a single customer that contributes a very significant revenue in its operation, and there is also no major customer segment as a result.
