Operating segment identification and disclosure

A logistics group operating distinct lines such as freight forwarding, warehousing, last-mile delivery and fleet leasing may have separate operating segments if reviewed individually by the chief operating decision maker, driving specific segment disclosure requirements. Misidentifying segments (e.g. reporting by legal entity instead of by how management actually runs the business) deprives investors of the granular performance and risk information IFRS 8 is designed to provide.

Who is the chief operating decision maker (CODM), the function that allocates resources and assesses performance, and what discrete financial information (e.g., separate P&Ls by freight, warehousing, last-mile) does that function regularly review? Do any business lines meet the quantitative thresholds (10% of combined revenue, profit, or assets) to be reportable segments in their own right, or could similar segments be aggregated based on shared economic characteristics? Is segment information measured and reconciled on the same basis reported internally to the CODM, even where that differs from consolidated IFRS figures?

1) Identify the chief operating decision maker (CODM), the function (often the CEO or an executive committee) that allocates resources and assesses performance, not necessarily a single named individual. 2) Determine what discrete financial information the CODM regularly reviews (e.g. separate P&Ls for freight forwarding, warehousing, last-mile, leasing). 3) Identify operating segments based on that internal management reporting structure, not an idealized external structure or legal entity lines. 4) Apply the quantitative thresholds (10% of combined revenue, profit/loss, or assets) to determine which operating segments are reportable. 5) Consider aggregation criteria for segments with similar economic characteristics (similar nature of services, customers, margins) before concluding segments must be reported separately. 6) Identify and disclose major customers reaching 10% of total revenue, and reconcile segment totals to consolidated figures.

Measure segment revenue, profit/loss, and assets using the same basis reported internally to the CODM, even if that basis differs from IFRS measurement principles used in the consolidated financial statements (e.g. management may allocate shared fleet costs differently); reconcile these internally-reported measures to the consolidated IFRS totals, explaining material reconciling items.

Disclose: (1) segment revenue (external and inter-segment), profit or loss, and assets for each reportable segment; (2) reconciliations of segment totals to consolidated amounts; (3) the basis of segmentation and the factors used to identify reportable segments; (4) major customer concentrations reaching 10% of consolidated revenue; (5) geographic information (revenue and non-current assets by region) if not already captured by the segment structure.

• Reporting segments based on legal entity structure rather than how the chief operating decision maker actually manages and reviews the business
• omitting major customer disclosure when a single shipper or 3PL client exceeds 10% of consolidated revenue
• aggregating dissimilar segments (e.g. combining a high-margin brokerage line with a low-margin trucking line) purely to reduce disclosure volume without meeting the aggregation criteria
• failing to update the segment structure when internal reporting changes following a reorganization.