Fs discl interim & segment reporting case study
- 1. Financial Statements – Disclosures (Interim Financial Reporting & Operating Segments) CASE STUDY Disclosure Plc (D’Plc) is a diversified conglomerate listed on the Nigerian Stock Exchange. It currently prepares its financial statements in accordance with Nigerian GAAP. Ahead of its first annual IFRS financial statements for the year ending 31 December 2012, the company wishes to publish its quarterly accounts for that year to meet IFRS requirements. Please work in your table groups to prepare answers to these questions. First, spend about 10 minutes discussing the questions. Appoint a spokesperson to discuss your thoughts with the rest of the group after 20 minutes. Question 1 – Interim reporting (a) Is the company right to assume IFRS requires its quarterly accounts for 2012 to be prepared in accordance with IFRS? If yes, why? Otherwise, advise management appropriately. (b) Can interim condensed financial information in accordance with IFRS be prepared for the three interim quarters in 2012, although D’Plc has never prepared financial statements for a full year in accordance with IFRS? What is the minimum information required by IAS 34? (c) In order to improve profitability of its Food business, management is considering a restructuring programme and has commenced dialogue with the employee union. This process is to be completed by the end of 2012, by which time a new brand will also be launched. Total severance pay is projected to be N48million. The FD is concerned about how to book this in his 2012 financial statements, particularly the quarterly accounts. Please advise him. (d) What disclosure information would you suggest to management of D’Plc to start considering ahead of its first interim IFRS financial statements come 2012? Question 2 – Operating segments An extract from the summary page of the new internal reporting pack provided to the CEO is given below. D’Plc management intends to report separately only the segments highlighted on the summary page. High end Food Food Total Food Electronics Household Total Home Clothes Speciality N'bn N'bn N'bn N'bn N'bn N'bn N'bn N'bn Revenue 136 426 562 83 112 195 368 61 Gross Margin 11% 4% 6% 34% 48% 42% 68% 46% Net profit 11 11 22 19 41 60 190 19 Capital additions 18 93 111 8 10 18 37 4 Goodwill allocation 90 34 58 12 (a) Do you agree with the management’s assessment of the segments that should be reported separately? (b) Will the adoption of IFRS 8 have an impact on the goodwill impairment testing process? (c) Can the group assess goodwill for impairment using the segments it expects to report separately? (d) Is the segment information above sufficient to meet the requirements of IFRS 8 for segment reporting in the IFRS financial statements of D’Plc? What additional information is required, if not? Total time (plus feedback): 40 minutes. ICAN IFRS Certification Technical Training Programme Financial Statements – Disclosures (Interim Financial Reporting & Operating Segments) 1