Shanahan Article on Segment Reporting

CFO Professional The joy of segment reporting John Shanahan 849 words 1 September 2011 Financial Review CFO CFOA First 41 English Copyright 2011. Fairfax Media Management Pty Limited. Technical Qantas segment analysis 1999-2004 1999 2000 2001 2002 2003 2004 $bn $bn $bn $bn $bn $bn International 308.3 374.3 458.7 202.3 221.6 397.8 Domestic 256.8 272.0 127.4 298.2 165.7 465.7 Other 136.7 169.4 109.7 178.3 179.7 234.7 Total EBIT 701.8 816.2 695.8 679.3 567.0 1,098.2 Source: Qantas Annual Reports Information on losses incurred by Qantas's international operations would have been prepared and reported internally. Under AASB 8, that data should be spelt out in detail to shareholders, John Shanahan suggests. Segment reporting is often seen as an afterthought. It doesn't change the results, it's just more disclosure and the numbers are too aggregated to be useful. However, particularly when analysed over a period of years, segment reporting gives a real insight about a company's performance. Previously we reported business and geographic sectors. Since June 2010, companies must report on operating segments under AASB 8. An operating segment is a component for which separate financial information is available that is evaluated regularly by the chief operating decision-maker. The principle is that financial information must be reported on the same basis as is used internally for evaluating operating segment performance. Qantas provides an interesting example. Its international operations reported a loss of more than $200 million in the 2011 financial year and restructuring is essential. Qantas states that this is an unacceptable return "on invested capital of over $5 billion". However it doesn't report international operations as a separate operating segment. The segments it chooses are Qantas, Jetstar, Qantas Freight, its frequent flyer operation and its Jetset Travelworld. Three of these segments clearly involve flying operations, both domestic and international. For...