1.20 Segment note: the effect of moving corporate costs into segment profit is not given in the note
UK Company A · a UK-listed medical technology group · Regulator-style question
In brief
In 2024 the Group began charging directly attributable corporate costs to its business units. Note 2.2 restates 2023 but leaves 2022 on the old basis, so [business unit] segment profit reads [n] for 2022 and [n] for 2023 in the same table. The note describes the change but does not say how much it moved each segment's profit. The strategic report does quantify the 2023 effect ([business unit] [amount]), but the note neither gives it nor refers to it.
The evidence, as filed
Screenshot withheld to protect the company’s identity: Annual Report 2024, page 202; Annual Report 2025, page 220; Annual Report 2024, page 40; Annual Report 2024, page 44; Annual Report 2024, page 48. Their wording or layout could lead back to the company even with names and figures masked; the evidence list below records what each page shows.
What the report shows, and what the rule requires
| What the annual report shows | What the rule requires |
|---|---|
| What the annual report shows The segment trading profit note gives the nature of the change in the segment profit measure and restates 2023 only; no amount of the effect on any segment, for 2024 or 2023, is given in the note. The strategic report gives the 2023 effect: [business unit] [amount], [business unit] [amount], [business unit] [amount]. | What the rule requires Note 2.2 states the effect of the change on each segment's trading profit (at least for the years shown on different bases), or cross-refers to where the effect is given. |
The rule
IFRS 8 Operating Segments, paragraph 27(e)
Version relied on: UK-adopted international accounting standards (UK Endorsement Board), as in force for financial years beginning in or after January 2025
Any change from prior periods in how segment profit or loss is measured must be explained, with its effect.
Why it applies here: the information on the effect exists in the report but is not in the audited note that must give it, and the 2022 column in the note cannot be compared with the later years without it.
Why it matters
A reader of the audited note sees [business unit] profit fall from [n] to [n] between 2022 and 2023 without being told in the note how much of that is the change of measure rather than performance.
Exposure
A question on disclosure; the information is given elsewhere in the Annual Report.
Our workings
Note 2.2 says that in 2024 [wording masked] the business units, that 2023 was restated and that 2022 was not, because the cost and effort would be excessive. The table then shows segment profit of [n] for [business unit] (2024, 2023, 2022). The business unit pages of the strategic report state that the allocation reduced 2023 segment profit by [amount] ([business unit]), [amount] ([business unit]) and [amount] ([business unit]).
[n] + [n] + [n] = [n].
| Segment | 2023 effect of the allocation, per the strategic report ([currency]m) |
|---|---|
| [business unit] | [n] |
| [business unit] | [n] |
| [business unit] | [n] |
| Total | [n] + [n] + [n] = [n] |
Management’s best defence, and our reply
The company would say that restating 2023 removes the need to quantify the effect for the comparison that matters (2024 against 2023), that the 2022 column is shown only because the [overseas annual filing] needs three years and is clearly labelled as not restated, and that the effect on 2023 is set out in the Annual Report's business unit reviews. It could add that paragraph 27(e) says 'the effect, if any', which a restatement of comparatives arguably delivers. However, the 2022 column sits in the same audited table on a different basis, the note itself gives no amount, and information outside the financial statements is not part of them unless cross-referred; because a reasonable preparer could take the company's reading, the point is put as a question.
The fix
- Add to Note 2.2: 'The change reduced 2023 segment trading profit by [amount] ([business unit]), [amount] ([business unit]) and [amount] ([business unit]); 2022 is presented on the previous basis.'
Question for the company
Did the Group consider the effect of the change in the segment profit measure to be given sufficiently by the restated 2023 column and the strategic report, and if so why was the note not cross-referred to the business unit reviews where the effect is quantified?
Evidence relied on
| # | What it shows | Type | Where |
|---|---|---|---|
| 1 | The note gives the nature of the change | Document | Annual Report 2024, page 202 |
| 2 | 2022 stays on the old basis | Document | Annual Report 2024, page 202 |
| 3 | [business unit] segment profit 2024, 2023 (restated) and 2022 (old basis) side by side | Document | Annual Report 2024, page 202 |
| 4 | The strategic report quantifies the 2023 effect for [business unit] | Document | Annual Report 2024, page 40 |
| 5 | 2023 effect for [business unit] | Document | Annual Report 2024, page 44 |
| 6 | 2023 effect for [business unit] | Document | Annual Report 2024, page 48 |
Absence check
- Document
- Annual Report 2024
- Where it would appear
- [n] Trading profit by business segment
- What is missing
- The amount of the effect of the change in the segment profit measure on each segment's profit, or a cross-reference to it
- Pages looked at
- Annual Report [amount].199-203 (Note 2), p.38-49 (business unit reviews), p.22 (financial review)
- Result
- 'decreased by' hits p.23 and [n] (financial review movements in other lines, not the segment measure) and p.40, [n] and [n]; 'restated' and the allocation terms also hit p.40, [n] and [n]. The effect amounts appear only on p.40, [n] and [n], the business unit reviews in the strategic report, for 2023 only, outside the financial statements and not cross-referred from the note; the hits on p.199 and [n] in Note 2 give the nature of the change and the restatement of 2023 but no amount, and the depreciation footnote on p.202 likewise gives no amount.
Prepared by Pramanex from the company’s published annual reports, without the company’s involvement, to show how an annual report review reads. The company is not named, and nothing on this page is a statement about any identifiable company. Observations are not an audit, review or other assurance engagement, and not legal advice. A regulator-style question is a question, not a conclusion.
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