Question 1: Please indicate whether you submitted comments to IASB and/or EFRAG during their consultations.

Transcription

1 1 EUROPEAN COMMISSION Internal Market and Services DG FREE MOVEMENT OF CAPITAL, COMPANY LAW AND CORPORATE GOVERNANCE Accounting Brussels, 30 May 2007 F3/RB D(2007) Endorsement of IFRS 8 Operating Segments Analysis of potential Impacts (API) Public consultation: Please send back responses by no later than 29 June The European Commission is seeking further input regarding the endorsement of IFRS 8 Operating Segments before finalising a report on the potential impact of endorsement for submission to the European Parliament in September We seek input from a broad range of constituents (incl. preparers, users, auditors, standardsetters, academics) to the Questionnaire (see ANNEX). The issue Adoption of IFRS 8 Operating Segments for use in the EU IFRS 8 Operating Segments (IFRS 8) has been published in its final version by the International Accounting Standards Board (IASB) on 30 November IFRS 8 is a disclosure standard replacing IAS 14 Segment Reporting (IAS 14), which is the standard currently endorsed for use in the EU. IFRS 8 introduces the "management-approach", which means that the defining of segments as well as the preparation of information used for segment reporting is based on information prepared for internal management decisions. IFRS8 has no implication on reported profit or loss; it is a pure disclosure standard. In other words, it has no impact on the way income, expenses, assets, liabilities ore equity are recognised, measured or presented in financial statements. However, segment information is a highly relevant source for users of financial statements to get a better understanding of the overall performance of a company. Background of Segment Reporting In 1997 there was an international discussion about the future direction of segment reporting. The revision of the segment reporting requirements in the US resulted in the introduction of the management approach for identification of segments as well as measurement principles and the revised standard SFAS 131 Disclosures about Segments of an Enterprise and Related Information (SFAS 131). The predecessor of the IASB, the International Accounting 2 Standards Committee (IASC), and the US Financial Accounting Standards Board (FASB) at that time could not agree on a common way forward. As an outcome, the US Standard SFAS 131 and the IASC standard IAS 14 differed in their basic approach. It was clear that at a certain point in time the debate had to be re-opened with the aim to converge the standards based on experience gained so far. Segment Reporting therefore when the elements of the "roadmap" have been agreed was identified as one specific area for convergence. Main changes from IAS 14 The key change introduced by IFRS 8 is the move to the management approach for identifying segments and for the measurement of segment information. The main changes are: IFRS 8 requires identification of operating segments on the basis of internal reports that are regularly reviewed by the entity's chief operating decision maker. IAS 14 requires identification of two sets of segments, one based on related products and services (primary segments) and the other based on geographical areas (secondary segments). IFRS 8 requires the amount reported for each operating segment item to be the measure reported to the chief operating decision maker for the purposes of allocating resources to the segments and assessing its performance. IAS 14 requires segment information to be prepared

2 in conformity with the accounting policies adopted for preparing and presenting the financial statements of the consolidated group. In contrast to IAS 14, IFRS 8 does not define segment revenue, segment expense, segment result, segment assets and segment liabilities, but requires an explanation of how segment profit or loss, segment assets and segment liabilities are measured for each reportable segment. In addition IFRS 8 introduces some additional disclosure requirements (also for interim reports) compared to IAS 14. The context of this Questionnaire After having received positive advice from the European Financial Reporting Advisory Group(EFRAG), Member States in the 2 February 2007 Accounting Regulatory Committee (ARC) meeting supported unanimously the Commission proposal to adopt IFRS 8 in the EU. In discussions with the Committee on Economic and Monetary Affairs (ECON) of the European Parliament (EP) it became evident that there were sufficient concerns which would lead the EP to the conclusion not to support endorsement of IFRS 8. The Commission agreed therefore that IFRS 8 will not be endorsed before 30 September Further, the Commission agreed that in the meantime it will continue to consult interested parties and will carry out an analysis of potential impacts of adopting IFRS 8. The Questionnaire annexed to this paper is part of the analysis. Responses and additional input received will be analysed and used for the final assessment. ANNEX 3 Questionnaire Please submit your response, which should be as precise and short as possible, to the European Commission, DG Internal Market and Services, Mr. Piotr Madziar, Head of Accounting Unit F3, B-1049 Brussels and/or to the following addresses: Piotr.Madziar@ec.europa.eu and Reinhard.Biebel@ec.europa.eu by no later than 29 June Please provide the following details together with your response: The name of your organisation : VIVENDI Short description of the general activity of your organisation : major player in entertainment with business activities in music, television, cinema, mobile, Internet and games. Country where your organisation is located: France (headquarter) Contact details incl. address : Vivendi _ 42 avenue de Friedland _ Paris Cedex 08 _ France ; bertrand.perrin@vivendi.com In case we would need further details on the submitted information we would take the liberty to contact the relevant respondent. Question 1: Please indicate whether you submitted comments to IASB and/or EFRAG during their consultations. Yes, through an Acteo/Medef/Afep comment letter dated May 19, 2006, a copy of which is attached after the completed questionnaire.

3 Question 2: a) Do you think information prepared under the management approach on which IFRS 8 is based is more relevant, reliable, comparable, understandable and useful than information prepared under IAS 14? b) Do you think that information prepared under the management approach improves the true and fair representation of business activities? c) Are you of the opinion that segment information based on the management approach provides greater accuracy for measuring individual segments and ultimately results in greater forecast precision than segment information based on IAS 14? a) b) and c). Yes, the information prepared under the management approach is more relevant, reliable and gives a true and fair representation of business activities. The business segment data disclosed by Vivendi in previous years was identical to that given to Vivendi Management and Supervisory Boards. In fact, Vivendi does not anticipate any significant impact from IFRS 8 endorsement: representation of business activities is reported through a single channel and expressed in different documents (consolidation information system, internal financial reporting and external financial reporting). The management approach helps users to better understand the way the group operates, evaluates the performance of the business segments and allocates necessary resources to them based on certain operating indicators, making it easier to forecast future cash flows. Question 3: a) Do you assess that cost for preparation of information is lower under IFRS 8 than under IAS 14? b) Do you think that the cost/benefit balance of replacing IAS 14 by IFRS 8 is positive (e.g. lower cost outweighing the potentially lower quality of information provided or potentially higher quality of information provided outweighing higher cost)? a) and b) : Yes, as the information is the same as used internally by management. ANNEX 4 Question 4: Do you consider that the principles on which IFRS 8 is based, in particular the fact that information for segment reports should be prepared through the eyes of the "chief operating decision maker", would pose problems on established EU practices, e.g. in the area of corporate governance? Preparing and disclosing segment information through the eyes of management is an improvement for Corporate Governance. It creates a unified way of reporting, both internally and externally. It contributes to greater transparency on the chief operating decision maker s decision to allocate resources and assess performance. Question 5: Do you agree with the argument that IFRS 8 requires smaller listed companies to report a segment by segment analysis of their business including commercial sensitive information with the effect that competitiveness of smaller listed companies in the EU will be harmed? Please provide reasons for your view and indicate how far that constitutes a change compared to the requirements of IAS 14.

4 Not applicable to Vivendi. Question 6: a) Do you believe that the lack of mandatory requirements for full segment information on a geographical basis in IFRS 8 gives sufficient reason for a non-endorsement decision? b) Do you believe that other mandatory requirements for segment information are missing in IFRS 8 (compared to IAS 14)? If yes, which ones? The core principle of IFRS 8 is to disclose information about business activities that are regularly reviewed by the chief operating decision maker for the purposes of allocating resources to the segments and assessing performance. Any mandatory requirements which would create constraints or restrictions would be contrary to this core principle. Question 7: Can you provide any information that has been generated by field studies, research work, internal analysis carried out in your organisation, jurisdiction? No Question 8: If you have any further comments on this consultation please provide them to us. IFRS as published by the IASB and IFRS as adopted by the EU should be identical so as to maintain the benefits of the IFRS adoption by the EU. The European Parliament should intervene as early as possible in the endorsement process along with the other authorities and committees. In particular, it is a matter of importance that the European Commission and the European Parliament ensure that the IASB does not modify the consistency of the IFRS accounting model without a deep evaluation of the potential consequences, notably for preparers and users. Thank you very much for providing your contributions! ***end of document***

5 A F E P Association Française des Entreprises Privées Kil-Woo Lee Project Manager IASB 30 Cannon Street London EC4M 6XH UK Paris, May 19, 2006 Re: ED 8 Operating Segments ACTEO, AFEP & MEDEF welcome the opportunity to comment on the IASB exposure draft ED8 : Operating Segments. We believe the draft IFRS is likely to bring improvements in the relevance, reliability and timeliness of segment reporting while reducing the cost of external reporting. SFAS 131 has been applied for close to ten years and has proven entirely satisfactory to users. We would like to emphasise that in our view the expected benefits can be reached only if SFAS 131 requirements are not increased, in particular in the areas of level of reconciliation, disclosure and measurement of specified items. If you would like further clarification of the points raised in this letter, please do not hesitate to contact us. Yours sincerely ACTEO AFEP MEDEF PATRICE MARTEAU Le Président ALEXANDRE TESSIER Le Directeur Général AGNES LEPINAY La Directrice des Affaires Economiques, Financières et Fiscales

6 Question 1 Adoption of the management approach in SFAS 131 The draft IFRS adopts the management approach to segment reporting set out in SFAS 131 Disclosures about Segments of an Enterprise and Related Information issued by the US Financial Accounting Standards Board. Is this approach to segment reporting appropriate? If not, why not? What, if any, alternative approach would you propose? Yes, we believe management approach to segment reporting is an appropriate approach. Users and group management have in common to be responsible for resource allocation decisions. Therefore, providing users with information extracted from internal reporting that group management uses for resource allocation purposes is relevant. It also provides information fully consistent with information provided in management commentary. Such consistency is particularly helpful to users. Question 2 Divergence from SFAS 131 Do you think that the draft IFRS should depart from the management approach in SFAS 131 by setting requirements for (a) the measurement of specified items or (b) the disclosure of specified amounts that might otherwise not be given? If so, identify the requirements you would add and indicate what you see as the relative costs and benefits of any such requirements. No, we do not think that the draft IFRS should depart from the management approach in SFAS 131. a) measurement of specified items Internal reporting used at group level is necessarily prepared on as consistent accounting principles as possible. We agree with the Board s observations in BC10 and do not expect accounting policies used in segment reporting to seriously depart from accounting policies implemented for external reporting. Potential departures are likely to arise only in areas where accounting requirements would conflict with the entity s or segment s business model or risk management policies. We believe that information consistent with the entity s business model and risk management policies is very useful to users in predicting future cash flows. We therefore fully support SFAS 131 requirements as they stand. b) disclosure of specified amounts As explained in our answer to question 1, we believe that users and management s resource allocation decisions require the same information. We therefore believe that the disclosure of information included in the existing internal reporting provides users with all information, and only the information, useful to them. To specify a list of required amounts would be contrary to the principle of providing information to users that allow them to see through the eyes of management. We see ED as an appropriate guideline.

7 Question 3 Scope of the standard The existing standard IAS 14 requires entities whose equity or debt securities are publicly traded and entities that are in the process of issuing equity or debt securities in public securities markets to disclose segment information. The draft IFRS extends the scope to include also entities that hold assets in a fiduciary capacity for a broad group of outsiders. Do you agree with the scope of the draft IFRS? If not, why not? No, we do not agree with the extension of the scope of the existing IAS 14. As the IASB explains in its basis for conclusions, the definition of publicly accountable entities is to be finalised as part of the IFRS for SMEs project. We therefore recommend that no decision is made prior to the finalisation of the IASB s definition of a publicly accountable entity. Question 4 Level of reconciliations The draft IFRS requires an entity to provide, for specified items, reconciliations of total reportable segment amounts to amounts recognised by the entity in accordance with IFRSs. It does not require such reconciliations for individual reportable segments. Do you agree with the level of reconciliations required in the draft IFRS? If not, indicate what you see as the relative costs and benefits of any other level of reconciliation. Yes, we agree with the level of reconciliation required in the draft IFRS. Beyond the relevance of providing users with information extracted from internal reporting, the draft IFRS is likely to provide benefits arising from: - the reduction of costs to prepare external reporting: external segment reporting would no longer generate extra costs, - the timeliness in which segment information can be produced, - the reliability of data provided: information used by management is more likely to be free from errors than information prepared for the sole benefit of external users. All the above benefits would be lost, were the draft IFRS to require via reconciliations a second set of information for external purposes only. Unlike other exposure drafts which present new requirements, the draft IFRS is based on an existing standard which has proven its efficiency in meeting users needs. We therefore recommend the IASB not to require more detailed or comprehensive reconciliations than prescribed in the existing SFAS 131. Question 5 Geographical information about assets The draft IFRS requires an entity to disclose geographical information about noncurrent assets excluding specified items. It does not require disclosure of geographical information about total assets. Do you agree with the requirement to disclose geographical information about noncurrent assets excluding specified items? If not, for which assets would you require geographical information to be given?

8 Yes, we agree Question 6 Consequential amendments to IAS 34 Interim Financial Reporting The draft IFRS requires an entity to disclose more segment information in interim financial reports than is currently required, including a reconciliation of the total of the reportable segments measures of profit or loss to the entity s profit or loss. Do you agree with the consequential amendments made to IAS 34? If not, why not? We agree with the consequential amendments made to IAS 34.