The Impact of IFRS 8 on Geographical Segment Information

Leung, E. and A. Verriest. 2015. The Impact of IFRS 8 on Geographical Segment Information. Journal of Business Finance & Accounting 42 (3): 273-309.

Posted: 22 Dec 2015

See all articles by Edith Leung

Edith Leung

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

Arnt Verriest

KU Leuven

Date Written: October 16, 2014

Abstract

This study investigates how the introduction of IFRS 8 affects segment disclosures for a large sample of European firms. In contrast to prior research we focus on geographical segments. Similar to SFAS 131, IFRS 8 aims to improve segment disclosures by requiring a “management approach”, which introduces considerable reporting discretion. We compare a hand-collected sample of restated IFRS 8 segment disclosures with historical IAS 14R disclosures. We find that geographical segments are more disaggregated under IFRS 8, although the number of financial items per segment and the likelihood of reporting segmental earnings decline. More importantly, we document predictable heterogeneity in the disclosure quality of segment information. First, we find that firms reporting poorly under IAS 14 continue to do so under IFRS 8, suggesting more cross-sectional divergence under the latter standard. Second, our results show that the impact of IFRS 8 varies with corporate transparency. Finally, we fail to document any clear economic and informational effects post IFRS 8, even for firms that exhibit disclosure quality improvements. Overall, we provide comprehensive evidence on the effects of IFRS 8 on geographical segment information and show that prior reporting behavior is a useful indicator for the impact of a new standard.

Suggested Citation

Leung, Edith and Verriest, Arnt, The Impact of IFRS 8 on Geographical Segment Information (October 16, 2014). Leung, E. and A. Verriest. 2015. The Impact of IFRS 8 on Geographical Segment Information. Journal of Business Finance & Accounting 42 (3): 273-309. , Available at SSRN: https://ssrn.com/abstract=2707023

Edith Leung (Contact Author)

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

Arnt Verriest

KU Leuven ( email )

Oude Markt 13
Leuven, Vlaams-Brabant 3000
Belgium

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