Ican 2023 Corporate Reporting Question 7

Fine Face (FF) Limited produces and sells its range of body care products through three separate divisions. In addition there are two laboratories which carry out research and development activities. In the first of these laboratories, the research and development activities is funded internally and centrally for each of the three sales divisions. It does not carry out research and development activities for other entities. Each of the three divisions is given a budget allocation, which it uses to purchase research and development activities from the laboratory. The laboratory is directly accountable to the divisional heads for this expenditure. The second laboratory performs contract investigation activities for other laboratories and body care companies. This laboratory earns 75% of its revenue from external customers and these external revenues represent 18% of the organisation’s total revenue. The performance of the second laboratory’s activities and the three separate divisions is regularly reviewed by the Chief Operating Decision Maker (CODM). In addition to the head of divisions, there is a head of the second laboratory. The head of the second laboratory is directly accountable to the CODM and they discuss the operating activities, allocation of resources and financial results of the laboratory. Fine Face Limited (FF) is uncertain as to whether the research and development laboratories should be reported as two separate segments under IFRS 8 – Operating Segments.