Question 4a

You are the financial controller of Omega, a listed entity which prepares consolidated financial statements in accordance with International Financial Reporting Standards (IFRS). The chief executive officer (CEO) of Omega has reviewed the draft consolidated financial statements of the Omega group and of a number of the key subsidiary companies for the year ended 31 March 2018. None of the subsidiaries are listed entities but all prepare their financial statements in accordance with IFRS. The CEO has sent you an email with the following queries:

Query One
I notice that the disclosures relating to operating segments in the consolidated financial statements appear to be based on the geographical location of the customers of the group. I am the non-executive director of another large listed entity and the segment disclosures in their consolidated financial statements are based on the type of products sold. Also some of our larger subsidiaries have customers located in more than one geographical region, yet they provide no segment disclosures whatsoever in their individual financial statements. I would like to see segment disclosures given in the individual subsidiary accounts as well. I really don’t understand these inconsistencies given that all these financial statements have been prepared using IFRS. Please explain the reasons for these apparent inconsistencies. (6 marks)

Required:
Provide answers to the three queries raised by the chief executive officer. Your answers should refer to relevant provisions of International Financial Reporting Standards.

Note: The mark allocation is shown against each of the three issues above.