Financial Statement Analysis. Chapter 5

Financial Statement Analysis Chapter 5 Interim and segment reporting Index • Introduction • Interim reporting • Segment disclosures Index • Introduction • Interim reporting • Segment disclosures Introduction • Timeliness is especially relevant in the current continuously changing environment. Users need more timely information in order to make informed decisions. Interim reports can provide this kind of significant information • Another kind of information which is extremely valuable is the company's activities in different industries or different geographical areas, due to the growing diversification and internationalization of firms, that is described by means of the segment disclosures Index • Introduction • Interim reporting • Segment disclosures Interim reporting • interim financial reports cover periods shorter than a full fiscal year • there are two alternative philosophies of interim reporting – Integral view –recognize estimated expenses and expected revenues in proportion to forecasted annual activity level – Discrete view –recognize expenses and expected revenues in the interim period in which they are incurred IASB acknowledges that it is better . It is better to adopt a mixed approach based on the nature of the expense or revenue Interim reporting • IAS 34 does not prescribe which entities should publish interim financial reports, how frequently, or how soon after the end of an interim period. • These decisions must be made by local regulators. • IAS 34 allows companies to disclose a complete or condensed set of financial statements Comparative periods to be provided Information as of June 30, 200X Statement of Financial Position Information as of December 31, 200X-1 Information for the three-moth period ended June 30, 200X Information for the three-moth period ended June 30, 200X-1 Statement of Comprehensive Income Information for the six-moth period ended June 30, 200X Information for the six-moth period ended June 30, 200X-1 Statement of Cash Flows Information for the six-moth period ended June 30, 200X Information for the six-moth period ended June 30, 200X-1 Statement of Changes in Equity Information for the six-moth period ended June 30, 200X Information for the six-moth period ended June 30, 200X-1 Index • Introduction • Interim reporting • Segment disclosures Segment disclosures • segment reporting is fully explained in IFRS 8 (Operating Segments) • companies are required to explain the factors that were used to identify the reportable segments as well as the products and services provided by each Segment disclosures IFRS 8 distinguishes between operating and reportable segments: • Operating segment, if it … – is a component of an entity's activity – has earnings and incur expenses, and also performs transactions with other segments – is reviewed by the operating management to take decisions – generates discrete financial information available Segment disclosures Reportable segment is an operating segment for which one of this thresholds is met: • the segment´s reported revenue (including both sales to external customers and intersegment sales or transfers) is 10% or more of the combined revenue, internal and external, of all operating segments. • the absolute amount of its reported profit or loss is 10% or more of the greater, in absolute amount, of : – the combined reported profit of all operating segments that did not report a loss and – the combined reported loss of all operating segments that reported a loss. • its assets are 10% or more of the combined assets of all operating segments Segment disclosures Segment disclosures TELEFÓNICA Telefónica Spain Telefónica Latin America Telefónica Europe Wire line, wireless, broadband, value added services and data businesses in the UK, Germany, the Isle of Man, Ireland, the Czech Republic and the Republic of Slovakia Wire line and wireless telephony, broadband, internet, data, broadband TV, valued added Services activities and their development in Spain Wire line and wireless telephony, broadband, internet, data, broadband TV, valued added Services activities and their development in Latin America