Reference no: EM132657400

Segment reporting can provide useful information for investors and competitors. Segment disclosures can result in competitive harm for the company making the disclosures. By analyzing segment information, potential competitors can identify and concentrate on the more successful areas of a disclosing company's business. Indeed, the IASB recognizes that competitive harm is an issue of concern for companies disclosing segment information.

• In developing IFRS 8, the IASB considered giving, but ultimately decided not to give, companies an exemption from providing segment information if they believed that doing so would result in competitive harm. The IASB believed that such an exemption would be inappropriate because it would provide a means for broad non-compliance with the new standard.

• IFRS 8 requires disclosures to be provided by country when revenues or long-lived assets in an individual country are material. However, IFRS 8 does not specify what is material for this purpose but leaves this to management judgment. Some commentators expressed a concern that firms might use high materiality thresholds to avoid making individual country disclosures, perhaps to avoid potential competitive harm.

Required:

Problem 1: What factors might a company consider in determining whether an individual foreign country is material to its operations? Should the IASB establish a percentage test to determine when an individual country is material? Why?