Segment Information: What Do European Small and Mid-Caps Disclose?

Frederic Demerens,Anne Le Manh,Pascale Delvaille,Jean-Louis Paré

doi:10.5539/ibr.v10n11p42

Abstract

The adoption of the IFRS 8 accounting standard symbolises the IASB's dual commitment: an effort toward convergence and harmonisation with the American standard, but also an effort to optimise the standardisation process through an unprecedented study: a post-implementation review. Many studies have laid the groundwork for an implementation review of the standard, mostly focusing on large firms. However, intermediate-size companies – which are much more numerous – are also faced with the application of IFRS standards. In this context, our study aims to analyse the implementation of IFRS 8 by a sample of intermediate-size European listed companies. Our research questions mainly focus on issues of compliance with the standard and the comparability of segment information reported by intermediate-size European companies. Our findings reveal a lower level of compliance than that observed in previous studies on samples of multinationals. The intermediate-size European companies in our sample use fewer segments and provide less information per segment, without however neglecting voluntary disclosures. Some significant differences emerge between companies depending on their country of domicile and their economic sector.

Highlights

When the IASB published the IFRS 8 Operating Segments standard in November 2006, many criticisms were levelled against the standard setter's decision, especially in Europe
Based on the American SFAS 131, this new standard broke with the approach that had been followed in the previous standard (IAS 14) and caused some people to fear a decline in the quality of segment information reported
We have distinguished between a segmentation based on products and services, (LOB segmentation), a segmentation based on geographic sectors, and a matrix segmentation based on both line of business (LOB) and geographic segments

Summary

Introduction

When the IASB published the IFRS 8 Operating Segments standard in November 2006, many criticisms were levelled against the standard setter's decision, especially in Europe. Based on the American SFAS 131, this new standard broke with the approach that had been followed in the previous standard (IAS 14) and caused some people to fear a decline in the quality of segment information reported. This was the first standard to be subjected to a post-implementation review conducted by the IASB. Nichols and Gray (2000) observe an improvement in segment reporting (greater number of segments and more information published) for the largest American firms after adoption of the SFAS 131 standard. On the contrary, Doupnik and Seese (2001) observe an improvement in the granularity (mainly the segmentation by country) of geographic information reported under the new SFAS 131 standard

Objectives

Methods

Results

Conclusion