The Gap between segment earnings under IFRS 8 and corporate-level income: Evidence from Jordanian Commercial banks

Abstract

This study aimed at investigating business segment reporting under IFRS 8, and analyzing the gap between business segment results and the consolidated business results. In addition, the study investigated the role of FTP, Cost allocation and Tax allocation in causing this gap.

The study used comprehensive survey methodology analyzing the annual reports of a sample of (12) Jordanian commercial banks.

The study found that IFRS 8 does not indicate how business segment result should be presented and we think this is a defect in the standard. The study also found that 100% of Jordanian banks define their segments along line of business, and 81% of the banks did not allocate capital according to segments. Also two banks allocated costs and tax provision on the segment, while the other did not. Finally all banks did not present transfer pricing in segment results. Our results suggested that aggregated and detailed segment income is incrementally useful to investors and this can be achieved by including FTP, cost allocation and tax provision within segment results.  

Key words: IFRS 8, Fund Transfer Pricing (FTP), Cost Allocation, Tax provision, Line of Business (LOB)

JEl Classification: M41