IPSAS 18 is based on IAS 14 Segment Reporting (Revised 1997).
IPSAS 18 Segment Reporting requires an entity to report on segments on a basis appropriate for assessing its past performance in achieving its objectives and for making decisions about the future allocation of resources.
IPSAS 18 was issued in June 2002 and applies to annual periods beginning on or after 1 July 2003.
History of IPSAS 18
Annual periods beginning on or after 1 July 2003.
Refer to IFAC website here
Summary of IPSAS 18 Events after the Reporting Period
The objective of IPSAS 18 is to establish principles for reporting segmented financial information. Disclosure of this information should enhance transparency and allow the users of the financial statements to evaluate the entity’s past performance and to identify the resources allocated to support the major activities.
Applies to all general purpose financial statements based on International Public Sector Accounting Standards prepared and presented under the accrual basis of accounting [IPSAS 18.1].
The standard applies to all public sector entities other than GBEs (Government Business Enterprises) [IPSAS 18.2].
Segment information is required only on the basis of the consolidated financial statements, in case a financial report contains both the consolidated financial statements of a parent as well as the parent’s separate financial statements [IPSAS 18.6].
Segment: is a distinguishable activity or group of activities of an entity for which it is appropriate to separately report financial information for the purpose of [IPSAS 18.9].
(a) evaluating the entity’s past performance in achieving its objectives
(b) making decisions about the future allocation of resources
Service segment: a distinguishable component of an entity that is engaged in providing related outputs or achieving particular operating objectives consistent with the overall mission of each entity [IPSAS 18.17].
Geographical segment: a distinguishable component of an entity that is engaged in providing outputs or achieving particular operating objectives within a particular geographical area [IPSAS 18.17].
Segment accounting policies: the accounting policies adopted for preparing and presenting the financial statements of the consolidated group or entity as well as those accounting policies that relate specifically to segment reporting [IPSAS 18.27].
Segment assets and liabilities: operating assets and liabilities that either are directly attributable to the segment or can be allocated to the segment on a reasonable basis [IPSAS 18.27].
Segment revenue and expense: revenues and expense directly attributable to a segment and the relevant portion of a revenue or expense that can be allocated on a reasonable basis to the segment [IPSAS 18.27].
Identification and reporting segments
An entity is required to identify segments based on its activities for which it is appropriate to report information separately [IPSAS 18.12]. In most case entities will refer to the classification of activities in budget information, which is usually reported to governing body [IPSAS 18.14].
The standard presumes that the information reported to governing body contains the basis for the segmented information and usually referred to as [IPSAS 18.17]:
• Service segments
• Geographical segments
In case the internal reporting reflect the way in which major outputs are identified, achievements monitored and needs for resources identified and managed, the internal reporting system shows a service segmentation and shall in most cases satisfy the requirements of the standard for external reporting [IPSAS 18.18].
Factors that usually are considered in indentifying service segments [IPSAS 18.19]:
• primary operating objectives of the entity
• nature of the goods or services provided or activities undertaken
• nature of the production process and/or service delivery and distribution process or mechanism;
• type of customer or consumer for the goods or services
• whether this reflects the way in which the entity is managed and financial information is reported to senior management and the governing board
• the nature of the regulatory environment or sector of government
When the internal reporting is organised on a regional basis (local, within or across the national state, per jurisdiction ,etc ) the internal reporting shows a geographical segmentation [IPSAS 18.20] and shall in most cases satisfy the requirements of the standard for external reporting [IPSAS 18.21]
Factors that usually are considered in indentifying geographical segments [IPSAS 18.22]:
• similarity of economic, social, and political conditions in different regions
• relationships between the primary objectives of the entity and the different regions
• whether service delivery characteristics and operating conditions differ in different regions
• whether this reflects the way in which the entity is managed and financial information is reported to senior managers and the governing board; and
• special needs, skills, or risks associated with operations in a particular area.
IPSAS 18 allows a primary and secondary segment reporting structure, where only limited disclosures about secondary segments are issued [IPSAS 18.23].
The accounting policies used as a basis for the segment information shall be in conformity with accounting policies used for the financial statements of the consolidated group or entity [IPSAS 18.43].
Assets that are jointly used by two or more segments should be allocated to segments if, and only if, their related revenues and expenses are also allocated to those segments [IPSAS 18.47].
When a segment is identified as a segment for the first time, prior period segment data that is presented for comparative purposes should be restated to reflect the newly reported segment as a separate segment [IPSAS 18.49].
In contrast to IAS 14 Segment Reporting [IAS 14.35-43] IPSAS 18 does not contain quantitative thresholds for reporting segments.
Following disclosures are required for each segment [IPSAS 18.51]:
• segment revenue and expenses (distinguishing between external and inter-segment) [IPSAS 18.52]
• carrying amount of segment assets and liabilities [IPSAS 18.53-54]
• costs incurred for segment assets that are expected to be used during more than one period [IPSAS 18.55]
• aggregate equity method income (JV’s, associates, other investments) of the entity net surplus or deficit [IPSAS 18.61]
• if JV’s, associates and other investments accounted for under the equity method is disclosed by segment, the aggregate investment is these investments shall be disclosed by segment [IPSAS 18.63]
• reconciliation of segment revenue to consolidated revenue [IPSAS 18.64]
• segment expenses should be reconciled to a comparable measure of consolidated expense [IPSAS 18.64]
• reconciliation between segment assets and entity assets [IPSAS 18.64]
• reconciliation between segment liabilities and entity liabilities [IPSAS 18.64]
• basis of pricing inter-segment transfers and any change therein [IPSAS 18.67]
• in case of changes in accounting policies adopted for segment reporting that have a material effect [IPSAS 18.68]:
o disclosure of the change, including the nature and reasons for the change
o restatement of comparative information, and the fact that it has been restated (or its impractibility)
o the financial effect of the change
Furthermore, an entity should disclose following information if not disclosed elsewhere [IPSAS 18.73]:
• types of goods and services included in each reported service segment
• composition of each reported geographical segment
• if neither a service nor geographical basis of segmentation is adopted, the nature of the segment and activities encompassed by it
Issuance of IPSAS 18: Segment Reporting
1 July 2003
Effective date of IPSAS 18