Segment disclosures are widely regarded as some of the most useful disclosures in

financial reports because of the extent to which they disaggregate financial

information into meaningful and often revealing groups. Discuss.

1) Discuss the objectives of segmental information and the requirements for the disclosure
of segmental information in annual reports;
(299 words)

2) Based on the extracts from the segment notes:

How much and what segmental information is provided in the segment notes;
Discuss whether the companies are in compliance with the relevant accounting
standard;
Discuss the similarities and differences between their disclosure practices;
(420 words)

In terms of disclosing general information, all companies analysed in this report comply with
the requirements imposed by IFRS8. Regardless of different internal operational focus and
segmental split, the information provided is symmetrical to a certain extent:
Compass Groups annual report clearly states that the management of the Company is
organised within three geographical segments: North America, Europe & Japan and Fast
Growing & Emerging.
Their basis of organisation relies on similar stages of development and economic
characteristics across the countries where it operates.
In disclosing the judgements behind its management decisions, the group provides brief
descriptions of the aggregated segments, complemented with the economic indicators
assessed (Revenues, organic revenues growth, operating profits and operating margins).
Internal revenues are derived from similar products and services delivered across its
operational segments, presented and measured by using a sectorised approach (AR2013)
Similarly, Dixons internal organisation is divided by the geographical location of its retail
outlets into three segments: UK & Ireland, Nordics and Greece.
The companys aggregation criteria takes into account areas which are either managed
separately or have similar trading characteristics.
The Group evaluates each operating segment based on underlying operating profits.
(AR2013)
All their segments are involved in the multi-channel sale of high technology consumer
electronics, personal computers, domestic appliances, photographic equipment,
communication products and related financial and after sales services.
GSK is structured as a combination of regional units and areas of focus: Pharmaceuticals
and Vaccines (US, Europe, EMAP and Japan), ViiV Healthcare, Consumer Healthcare and
other trading.
Internal aggregation method relies on the companys global unit split. However, the other
trading segment includes Canada, Puerto Rico, Australasia, central vaccine tender sales
and contract manufacturing sales, together with costs such as vaccines R&D, central
dermatology costs and central manufacturing costs not attributed to other segments.
(AR2013)
The economic indicators assessed comprise of each segments operating profit and
turnover.

Segments names reflect the products and services from which each unit derives its
revenues.
Likewise, Burberry reports two operating segments: Retail/ Wholesale and Licensing.
Aggregation criteria considers the source of revenue of each segment:
Retail/Wholesale Sale of luxury goods through internal mainline store, concessions,
outlets and digital commerce, as well as franchises, prestige department stores and
multi-brand specialty accounts;
Licensing Receipt of royalties from the Groups partners in Japan and global
licenses of fragrances, eyewear, timepieces and children wear;
Analysis of segmental turnover and operating profit represents the basis of judgements
made by management in aggregating Retail/Wholesale as the core activity of the company,
but also report on their licensing characteristics.