IPSAS 18
Active
Segment Reporting
Prescribes disclosure of information about the differing parts (segments) of an entity, including identification of segments, their profit/loss and assets, and internal allocation bases. Effective 1 July 2003.
Active Standard
IPSAS 18 Segment Reporting is the current, active standard issued by the IPSASB for disclosing information about the differing parts of an entity. It is effective for annual financial statements covering periods beginning on or after 1 July 2003 (earlier application encouraged).
IPSAS 18 is based on IAS 14 Segment Reporting, adapted for the public sector with commentary on reporting entities that are not profit-oriented, the relevance of segments to entity-wide resource allocation, and public-sector internal allocation bases.
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Objective, Scope & Definitions (paras. 1–9)
Objective & scope
Establishes principles for reporting financial information by segments, to (a) help users understand past performance and the resources allocated to major activities, and (b) enhance transparency and accountability.
Applied by an entity preparing accrual-basis financial statements, in the presentation of segment information Applies to complete sets of published financial statements complying with IPSAS
If BOTH consolidated statements of an economic entity and the separate statements of the controlling entity are presented together, segment information need only be presented for the CONSOLIDATED statements (para. 6).
The core definition (para. 9)
Segment
A distinguishable activity or group of activities of an entity for which it is appropriate to separately report financial information for the purpose of (a) evaluating the entity's past performance in achieving its objectives, and (b) making decisions about the future allocation of resources.
Why segments matter in the public sector: entity-wide/consolidated statements show WHAT resources were controlled and WHAT it cost overall – but not the specific operational objectives, activities, and resource allocation WITHIN the entity (para. 10).
2
Identifying Segments – Reporting Structures (paras. 12–16)
Internal reporting is the usual starting point
In most cases, the segments reported internally to the governing body and senior manager – often reflecting budget documentation's major activity classifications – will ALSO satisfy this Standard's external reporting requirements.
JUDGMENT FACTORS (PARA. 15)
The objective of segment reporting itself (accountability + resource-allocation decisions) Community/elected-representative expectations about key activities The Conceptual Framework's qualitative characteristics Whether the structure reflects what the governing body/senior manager actually uses
Whole-of-government reporting patterns (para. 16)
Major economic/GFS functional classifications – health, education, defense, welfare, plus major trading activities (power stations, banks, insurers) Portfolio responsibilities of individual ministers/executive members – often but not always aligned with the economic classifications above
Determining the right segment structure involves judgment – there's no single mandated basis, unlike some other standards' quantitative thresholds.
3
Service Segments & Geographical Segments (paras. 17–23)
Service segments – the typical public sector default
A distinguishable component engaged in providing related outputs or achieving particular operating objectives consistent with the entity's overall mission. Government departments are usually managed along service lines – e.g. an education department split into primary, secondary, and tertiary segments.
FACTORS (PARA. 19)
Primary operating objectives and associated goods/services/activities Nature of goods/services; nature of the production/delivery process Type of customer/consumer; internal management reporting basis Regulatory environment or government sector
Geographical segments & multiple segmentation (paras. 20–23)
A distinguishable component engaged in providing outputs or achieving operating objectives within a particular geographical area – adopted where internal reporting/resource decisions are made on a regional basis.
Similarity of economic/social/political conditions across regions Whether service delivery/operating conditions differ by region Special needs, skills, or risks in a particular area
Multiple segmentation (both service AND geographical) is useful when an entity's objectives are strongly affected by BOTH dimensions – reported separately or as a matrix, potentially with a primary/secondary structure (para. 23).
4
Reporting Structures Not Appropriate (paras. 24–26)
Two common but unsatisfactory bases
Aggregating by budget-dependent vs TRADING activities, or budget-dependent vs COMMERCIAL public sector entities – unlikely to give users relevant performance information Reports structured ONLY by expenditure nature (wages, rent, supplies, capital) to evidence budget-appropriation compliance, rather than by activity/objective
IPSAS 22 separately covers General Government Sector (GGS) disclosures for governments electing to report on that statistical basis – not a substitute for IPSAS 18 segment reporting.
When internal reporting doesn't fit (para. 26)
If an entity's internal reporting structure doesn't satisfy this Standard's objective, it must independently identify segments meeting the para. 9 definition for EXTERNAL reporting purposes, and disclose the required information (§8) – even though that structure differs from what's used internally.
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Definitions of Segment Revenue, Expense, Assets & Liabilities (para. 27)
Segment revenue & expense
SEGMENT REVENUE INCLUDES
Directly attributable/reasonably allocable revenue – budget appropriations, grants, transfers, fines, fees, goods/services provided externally or to other segments.
SEGMENT REVENUE EXCLUDES
Interest/dividend revenue (unless the segment is primarily financial in nature) Gains on investment sales or debt extinguishment (same carve-out)
SEGMENT EXPENSE EXCLUDES
Interest (unless primarily financial); losses on investment sales/debt extinguishment (same carve-out) Share of associates'/joint ventures' net deficit; income tax/equivalent expense General admin/head office expenses relating to the entity as a whole
Segment assets & liabilities
SEGMENT ASSETS
Operating assets employed in the segment's activities, directly attributable or reasonably allocable. Include related receivables/investments if interest/dividend revenue is included; include equity-method investments only if their surplus/deficit is in segment revenue. EXCLUDE income tax/equivalent assets.
SEGMENT LIABILITIES
Operating liabilities from the segment's activities, directly attributable or reasonably allocable. Include the related interest-bearing liability if interest expense is included. EXCLUDE income tax/equivalent liabilities.
Examples of segment assets: current assets, PP&E, right-of-use assets, intangibles used in operations – NOT general/head-office assets like a central administration building or a parliamentary building (para. 33).
6
Attributing Items to Segments (paras. 28–38)
Internal reporting as the presumption – with limits
There's a presumption that amounts identified with segments for INTERNAL reporting are directly attributable or reasonably allocable for EXTERNAL segment reporting too (para. 29).
An internal allocation basis that's SUBJECTIVE, ARBITRARY, or hard for external users to understand does NOT constitute a "reasonable basis" under this Standard – even if used internally. Conversely, an item NOT allocated internally despite a reasonable basis existing must still be allocated externally (para. 30).
Block/line-item appropriations & unattributed amounts
Government funding is often via "block" or "line item" appropriations not tied to specific service lines – making direct attribution or reasonable allocation impossible in some cases. UNATTRIBUTED revenue, expense, assets, and liabilities are reported as an unallocated amount in the required reconciliation (§8, para. 64) (para. 31).
Goodwill from a public sector combination (IPSAS 40) is included in segment assets if directly attributable/allocable, with related impairment as segment expense (para. 34). Debt issued centrally is often NOT allocable – unless "finance" is itself identified as a separate segment (para. 36).
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Segment Accounting Policies, Joint Assets & Newly Identified Segments (paras. 43–50)
Same policies as the entity-wide statements
Segment information is prepared using the SAME accounting policies as the consolidated/entity-wide financial statements (para. 43) – plus additional segment-specific policies (e.g. inter-segment transfer pricing).
Additional info on a DIFFERENT basis is permitted if relevant AND the measurement basis is clearly described (para. 46) Jointly used assets are allocated to segments IF AND ONLY IF their related revenue/expenses are also allocated (para. 47)
Newly identified segments – restate comparatives (para. 49)
A segment identified for the first time → prior-period comparative data RESTATED to show it separately, unless impracticable
Common triggers: a shift from service to geographical segment structure, significant new activities, or an internal support service starting to serve external parties.
8
Disclosure Requirements (paras. 51–75)
Mandatory, per segment (paras. 52–55, 61, 64)
Segment revenue AND expense – split: budget appropriation revenue, other external revenue, inter-segment revenue Total carrying amount of segment ASSETS Total carrying amount of segment LIABILITIES Total cost incurred to acquire segment assets used over more than one period Aggregate share of associates'/joint ventures' net surplus (deficit), IF substantially all their operations sit within one segment (with related investment amount) A RECONCILIATION between segment totals and entity/consolidated totals – revenue, expense, assets, liabilities each reconciled separately
Encouraged (not required) & other disclosure matters
Items of unusual size/nature/incidence relevant to explaining segment performance Segment cash flows (per IPSAS 2), OR depreciation/amortization and other significant non-cash items if cash flows aren't disclosed Minimum cross-basis disclosures – e.g. geographical segment expense/assets/capital outlay, even when the primary basis is service segments (and vice versa) Broad operating objectives per segment, and the extent achieved
No segment result required: unlike IAS 14, this Standard does NOT require disclosure of a segment operating result. If one IS disclosed, it must exclude finance charges (para. 58). Inter-segment transfer PRICING BASIS, and any change in it, must be disclosed (para. 67) – a pricing method CHANGE itself is not treated as an accounting policy change requiring restatement.
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Worked Example – Education Authority Segment Disclosure
Four segments: Primary/Secondary, Tertiary, Special Services, Other Services – 20X2 (CU millions)
ItemPri/SecTertiarySpecial SvcOther SvcConsolidated
Total segment revenue6328219101
Total segment expenses(60)(28)(23)(5)(96)
Unallocated central expenses(7)
Deficit from operating activities(2)
Interest expense / revenue (net)(2)
Share of net surplus of associates88
Surplus for the period4
Segment assets54341010108
Investment in associates (equity method)3232
Unallocated central assets35
Consolidated total assets175
Segment liabilities2588142
Unallocated central liabilities40
Consolidated total liabilities82
The Authority reports on four functional segments. Special Services provides commercial educational services to corporate employees, using the Pri/Sec and Tertiary segments' capacity on a fee basis (inter-segment transfers of 20, eliminated on consolidation). Other Services administers a 40%-owned equity-accounted foundation (EuroED Ltd) providing services internationally. A geographical note discloses Eastern Europe operations separately: cost of services 5 (4 in 20X1), carrying amount of facilities 3 (6.5 in 20X1) – illustrating the encouraged minimum geographical disclosure alongside a primarily service-segment structure (§8).
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Effective Date & Amendment Timeline (paras. 76–76G)
Amendment history at a glance
Base Standard: periods beginning on/after 1 July 2003.
EffectiveChange
1 Jan 2017Para. 77 (IPSAS 33); para. 69 (Improvements to IPSAS 2015)
–Paras. 27, 32 (IPSAS 37, Joint Arrangements – applied alongside IPSAS 37)
1 Jan 2018Paras. 2, 3 deleted; paras. 16, 24, 38, 41 amended – The Applicability of IPSAS
1 Jan 2019Paras. 34, 37 – IPSAS 40, Public Sector Combinations
1 Jan 2025Paras. 33, 35 – IPSAS 43, Leases (right-of-use asset terminology)
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Relationship to IAS/IFRS – Comparison with IAS 14
Comparison – IPSAS 18 vs IAS 14
IPSAS 18 is drawn primarily from IAS 14 (revised 1997), Segment Reporting – an IFRS Standard subsequently withdrawn and replaced by IFRS 8 (Operating Segments) in the private sector. IPSAS 18 has NOT followed IFRS 8's "management approach" model.
TopicDifference
Segment definitionIPSAS 18: appropriate for evaluating past performance and resource-allocation decisions. IAS 14: requires business AND geographical segments specifically
Segment resultIAS 14 requires disclosure; IPSAS 18 does not require it (though encourages related non-cash disclosures)
Secondary segmentsIPSAS 18 doesn't require secondary segment disclosure, but encourages minimum cross-basis disclosures
Quantitative thresholdsIPSAS 18 specifies NONE for identifying reportable segments – a judgment-based approach throughout
Terminology"Revenue," "statement of financial performance," "net assets/equity" (IPSAS 18) vs "income," "income statement," "equity" (IAS 14)
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Statement / Process Mapping
Segment identification decision map
- Does internal reporting to the governing body/senior manager reflect distinguishable activities usable for accountability and resource-allocation decisions? → adopt that structure (§2)
- Is that internal structure organized by SERVICE lines, GEOGRAPHY, or both? → classify accordingly (§3)
- Is the internal structure only budget-dependent-vs-trading, or expenditure-by-nature for compliance purposes? → NOT appropriate for external reporting; identify segments independently (§4)
- For each identified segment: attribute or reasonably allocate revenue, expense, assets, liabilities – using internal allocations as a presumption, but excluding arbitrary bases (§6)
- Is a new segment identified for the first time this period? → restate prior-period comparatives, unless impracticable (§7)
Concept-to-statement mapping table
IPSAS 18 conceptStatement(s)Notes
Segment revenue & expenseNotesNot shown on the primary SOFPerformance itself
Segment assets & liabilitiesNotesNot shown on the primary SOFP itself
Reconciliation to entity totalsNotesTies segment disclosures back to the primary statements
Unallocated central itemsNotesBridges segment totals to consolidated totals
Segment operating objectives & achievementAnnual ReportOften reported outside the financial statements themselves
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Related Standards – Cross-Reference Map
How IPSAS 18 connects across the IPSAS body of literature
StandardNature of the connection
IPSAS 1Material item disclosure at the entity level – para. 56 encourages evaluating significance at the SEGMENT level too (§8)
IPSAS 2Segment cash flow disclosure encouragement follows IPSAS 2's operating/investing/financing framework (§8)
IPSAS 3Governs restatement mechanics for segment accounting policy changes (§7)
IPSAS 12Cost allocation guidance usable for attributing costs to segments (§6)
IPSAS 22General Government Sector disclosure – a distinct statistical-basis alternative, not a segment-reporting substitute (§4)
IPSAS 35Intra-economic-entity eliminations occur BEFORE segment revenue/expense/assets/liabilities are determined (§6)
IPSAS 37Joint arrangement equity-accounted surplus/deficit feeding segment revenue (§5)
IPSAS 40Goodwill and fair value adjustments from public sector combinations affecting segment assets (§6)
IPSAS 43Right-of-use assets and lease liabilities included in segment assets/liabilities (§5)
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Quick-Reference Glossary
Segment
A distinguishable activity or group of activities for which separate financial information is appropriate for performance evaluation and resource-allocation decisions.
Service segment
A distinguishable component providing related outputs or achieving particular operating objectives consistent with the entity's mission.
Geographical segment
A distinguishable component providing outputs or achieving operating objectives within a particular geographical area.
Segment accounting policies
Policies adopted for the consolidated/entity statements, plus policies specific to segment reporting (e.g. inter-segment transfer pricing).
Segment assets / liabilities
Operating assets/liabilities directly attributable to, or reasonably allocable to, a segment's activities.
Segment revenue / expense
Revenue/expense directly attributable or reasonably allocable to a segment, including inter-segment amounts.
Financial statement key
Notes Notes to the financial statements
Annual Report Broader annual report, outside the financial statements