Segmental Reporting Quality After IFRS 8 : Multi-Dimensional Measures

While the IASB had reduced the differences between SFAS & IFRS, in that IFRS 8 (Segment reporting) is a copy of the US SFAS 131, the quality of segment disclosure after IFRS 8 is under question. The European Parliament endorsed IFRS 8 after a great deal of scrutiny and much debate. Although the endorsement indicated approval of IFRS 8 by the European Union countries, the EU Parliament expressed reservations and regrets about the standard. In this context, this study addresses the effectiveness of IFRS 8 in improving the quality of segmental reporting in EU. However, quality assessment is a complex issue and prior studies have used different definitions and measures for disclosure quality, this study also assesses the impact of using alternative proxies for disclosure quality. Findings document conflicting evidence on the impact of IFRS 8 on disclosure practices. While the quantity of information decreased for the two years after the adoption of the new standard, the fineness of information significantly improved. Similarly, cross segment variability and consistency dimensions show slightly improvement in the post IFRS 8 periods. Furthermore, the empirical evidence indicates a complementary relationship between the four dimensions, suggesting the impossibility of adequately describing segmental disclosure quality in terms of a single dimension. This study contributes to literature in two ways. Firstly, it contributes to disclosure literature by helping to appropriately define and measure the quality of segmental information. Secondly, it provides evidence on the effectiveness of a debatable standard, IFRS 8