Analysis of Segment Reporting and Consolidated Financial Results

This report provides a comprehensive analysis of segment reporting, focusing on its application in financial statements and consolidated accounting. It examines the core components of segment reporting, including geographically-based external reporting and industry or product-line based internal reporting. The report delves into the criteria for identifying reportable segments as defined by AASB 8, such as business activities, chief decision-maker review, and discrete financial information. It explores the accounting policies related to segment reporting, emphasizing the importance of reconciliation schedules to describe the variations between segment amounts and consolidation totals. The report uses the annual report of HIG to illustrate the practical application of segment reporting, including the identification of reportable segments, the use of consolidated accounting results, and the reconciliation of net gain/loss after tax to cash flow from operating activities. It highlights the allocation of expenses and revenues when two segments jointly use the same asset, demonstrating the practical considerations in segment reporting. The report references key literature and standards, including AASB 8 and AASB 10, to support its analysis and provide a robust understanding of segment reporting.

Running head: SEGMENT REPORTING
Segment Reporting
Name of the Student:
Name of the University:
Author’s Note:
Course ID:

1SEGMENT REPORTING
Table of Contents
Answer to Part 1a:......................................................................................................................2
Answer to Part 2c:......................................................................................................................3
References:.................................................................................................................................7

2SEGMENT REPORTING
Answer to Part 1a:
According to Aleksanyan and Danbolt (2015), external segment reporting is
geographically-based, while the internal segment reporting is industry-based or product-line
based. According to AASB 8, the components of a business organisation includes
engagement in business activities, review of operating results on the part of the chief
decision-maker and availability of discrete financial information. The segmental expenses of
a business organisation consist of the following:
 Inter-segmental transactions in relation to result from operational activities
 Inter-segmental transactions that are attributable directly or allocable to a segment
reasonably
As laid out by Cormier, Magnan and Demaria (2016), the reportable segments of an
organisation comprise of the business and geographical segments, for which maximum
portion of the revenue is made through sale to the external customers and they include the
following as well:
 Transaction with the other segments is above 10% of the overall revenue
 Segment result is above 10% of the combined outcome of all segments
 Assets are above 10% or greater of the overall assets of the segments
The accounting policies related to segment reporting would be identical with those
utilised in the consolidated financial statements. In cases, two segments jointly use the same
asset or additional segments are allocable to segments, it is necessary to allocate the
associated revenues and expenses (Aasb.gov.au 2017).
According to AASB 10, the primary goal is to formulate doctrines for presenting and
preparing consolidated financial statements, when an organisation is the controller of a single

3SEGMENT REPORTING
or more entities (Aasb.gov.au 2017). The reconciliation schedules need to be depicted in the
annual report to describe the variation between the segment amounts and totals of
consolidation. The reconciliations would include the revenue related to reportable segment to
consolidated revenue and the profit and loss of reportable segment to the consolidated income
before taxes. The second reconciliation further includes inter-segmental revenues,
expenditures along with allocated or common costs. In addition, further reconciliations take
into consideration the assets of reportable segment to consolidated assets like corporate assets
and in case; there is disclosure of other significant items, the segment amounts need to be
reconciled with the consolidated amounts.
Hence, based on the above discussion, it could be stated that both segment reporting
and consolidated accounting are needed in the same financial report of an organisation, as it
helps in authenticating the quality of the enterprise-wide disclosures. In addition, it provides
the investors and other associated stakeholders about the true and fair financial position and
performance of the concerned organisation.
Answer to Part 2c:
Based on the annual report of HIG, it could be stated that the management of the
organisation takes into account the business from a perspective of project categorisation and
four reportable segments have been identified. These reportable segments include evaluation
or exploration, Freida, Ramu and Corporate. The corporate comprises of the other business
activities of the organisation at offices held in Brisbane and PNG (Frias‐Aceituno,
Rodríguez‐Ariza and Garcia‐Sánchez 2014).
Reportable segment results:

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Consolidated accounting results:

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The consolidated profit and loss account is prepared in accordance with the “Papua
New Guinea Companies Act 1997” and it conforms to the “International Financial Reporting
Standards (IFRS)”. The organisation uses the historical cost method to develop the financial
statements. The same conventional method is used as well to develop the reportable segment
results. From the above two figures, it could be clearly observed that the overall amount of
each reportable segment matches with the overall consolidated group amounts. No difference
in the amounts of the two depicted segments could be found out because the organisation has
used the identical accounting estimates for both types of reporting.

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However, HIG has reconciled the net gain (loss) after tax to cash flow from the
overall operating activities. This has been depicted below in the form of a table as follows:
The above table helps in depicting the net loss suffered on the part of the organisation
for both the consolidated group and the holding organisation. The reconciliation schedules
have been depicted in the annual report to describe the variation between the segment
amounts and totals of consolidation. The reconciliation includes the net income related to
reportable segment to consolidated revenue and the profit and loss of reportable segment to
the consolidated income before taxes. In cases, two segments jointly use the same asset or
additional segments are allocable to segments, it is necessary to allocate the associated
revenues and expenses (Nichols, Street and Tarca 2013). In this case, HIG has allocated the
related expenses and revenues, since two segments are jointly involved in using the same
asset.

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References:
Aasb.gov.au. (2017). [online] Available at:
http://www.aasb.gov.au/admin/file/content105/c9/AASB8_08-15_COMPnov15_01-16.pdf
[Accessed 2 Oct. 2017].
Aasb.gov.au. (2017). [online] Available at:
http://www.aasb.gov.au/admin/file/content105/c9/AASB10_08-11.pdf [Accessed 2 Oct.
2017].
Aleksanyan, M. and Danbolt, J., 2015. Segment reporting: Is IFRS 8 really
better?. Accounting in Europe, 12(1), pp.37-60.
Cormier, D., Magnan, M. and Demaria, S., 2016. A Look at EBITDA Reporting and
Market. Cahier de recherche, p.02.
Frias‐Aceituno, J.V., Rodríguez‐Ariza, L. and Garcia‐Sánchez, I.M., 2014. Explanatory
factors of integrated sustainability and financial reporting. Business strategy and the
environment, 23(1), pp.56-72.
Nichols, N.B., Street, D.L. and Tarca, A., 2013. The impact of segment reporting under the
IFRS 8 and SFAS 131 management approach: A research review. Journal of International
Financial Management & Accounting, 24(3), pp.261-312.