Woolworths and Qantas Segment Reporting

AASB 114

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. 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...