Operating segment identification and disclosure

Segment disclosure under the management approach forces the bank to show investors the same view of performance that its own CEO uses to allocate capital and judge business lines, which is far more informative than an externally-imposed generic split, but it also means segment figures can embed internal transfer pricing and allocation conventions that differ from consolidated IFRS figures, so reconciliation to the primary statements is essential to prevent confusion.

Who is the actual chief operating decision maker, and what internal reports (monthly packs by Retail, Corporate, Treasury) do they regularly review to allocate resources and assess performance? Do the identified components meet the quantitative 10% thresholds (revenue, profit or loss, or assets) for separate reportable segment disclosure, and does the 75% external revenue test require adding further segments? Are segment figures presented on the same internal management basis reported to the CODM (including internal transfer pricing conventions) rather than restated to a consolidated IFRS-consistent basis?

1. Identify the chief operating decision maker (CODM), the function that actually allocates resources and assesses performance, which may be a person, the CEO, or a committee, not necessarily the person with that literal job title.
2. Determine the operating segments based on the components of the entity about which the CODM regularly reviews discrete financial information (e.g., monthly packs by Retail, Corporate, Treasury).
3. Test each identified component against the quantitative thresholds (10% of combined revenue, of the greater of combined profit or combined loss, or of combined assets) to determine which are reportable.
4. Consider voluntary aggregation of segments with similar economic characteristics (similar products, customers, regulatory environment, margins) only where the aggregation criteria in the standard are met, not merely for convenience.
5. Apply the 75% external revenue test across reportable segments, adding further segments if necessary to meet it.
6. Provide required entity-wide disclosures on products/services, geography, and major customer concentration regardless of the reportable segment structure.

Measure segment revenue, profit or loss, and assets/liabilities using the same basis actually reported to the CODM internally, including internal transfer pricing conventions (e.g., funds transfer pricing charged by Treasury to Retail and Corporate) even where these differ from consolidated IFRS measurement principles; do not restate segment figures onto an IFRS-consistent basis for disclosure purposes, since the objective is to show the actual internal management view, not a normalized one.

Disclose: (1) factors used to identify reportable segments, including the basis of organization (products, geography, regulatory environment); (2) segment revenue split between external customers and inter-segment amounts; (3) segment profit or loss, and the measure of segment assets and liabilities reviewed by the CODM; (4) reconciliations of total reportable segment revenue, profit or loss, assets, and liabilities to the corresponding consolidated financial statement amounts, explaining material reconciling items; (5) entity-wide disclosures on products/services, geographic areas, and major customers (each representing 10% or more of total revenue).

• Defining segments based on legal entity structure or product categories rather than the actual internal management reporting structure reviewed by the CODM
• omitting the required reconciliation between segment totals and consolidated financial statement totals
• using external, market-facing segment definitions that do not match how the bank is actually managed internally
• aggregating dissimilar segments (e.g., Retail and Corporate Banking with materially different margins and risk profiles) purely to reduce disclosure volume without meeting the aggregation criteria
• failing to apply the 75% external revenue test and under-disclosing reportable segments as a result.