Overview
The newly implemented FRS 108 requires identification of operating segments on the basis of internal reports that are regularly reviewed by the entity’s chief operating decision maker in order to allocate resources to the segment and assess its performance. On the other hand, the old FRS 14 requires companies to identify two sets of segments which are primary and secondary segments. One is based on related products and services (Business Segmentation), and the other on geographical areas (Geographical Segmentation). In addition, according to FRS 108, companies have to disclose further information such as major customers whom contributed more than 10% of the Group’s revenue.
Company Overview
As such, the two companies that we have chosen to analyze the addition costs and benefits by the implementation of FRS 108 are Aztech Group Limited (Aztech) as well as Singapore Telecommunications Limited (SingTel). Aztech is incorporated in 1986 and is subsequently listed on the Main Board of the Singapore Stock Exchange. Aztech being a dynamic international group with key activities in Electronics Design & Manufacturing, Materials Supply and Marine Logistics is operating in six countries over three continents. On the other hand, SingTel which is the largest listed company on the Singapore Exchange by market capitalisation is listed on the Singapore Exchange (SGX) in November 1993. SingTel is a leading telecommunication company which offers a wide range of services such as mobile, data, Internet, info-communications technology, satellite and pay TV.
Costs and difficulties
Financial information collection, processing and dissemination cost
The costs associated with financial information collection, processing, and dissemination can be high. For example, prior to FRS 108, Aztech reported their segment based on types of goods supplied and services provided by the Group’s operating divisions (i.e. ODM/OEM, Contract Manufacturing, Retail Distribution, Materials Supply & Marine Logistics). However, with the new implementation of FRS 108, the main categories of business segment are now Electronics, Materials Supply & Marine Logistics and Others. As a result, this new way of segmentation will require additional costs of categorising different operating units under Electronics, Materials Supply & Marine Logistics and Others. Processing the information may be difficult and costly as this is the first time they encounter a change in information collection and hence different processing method may be adopted.

Competitive disadvantage cost
Disclosing segment based on resource allocation may highlight opportunities previously unknown to competitors, thereby undermining a company’s competitive advantage. For example, competitors will now have a better knowledge of how Aztech allocate their resources. In this case, Aztech chose to allocate their resources based on Electronics, Materials Supply & Marine Logistics and Others which are previously not known to competitors.
Litigation cost
Litigation costs can result when there is alleged financial misrepresentation. For example, shareholders may initiate litigation when there’s a sudden drop in stock price. This sudden drop in stock price may be associated to the release of new financial information or a change in reporting standard or method. This applies to Aztech as they have just switched their segment reporting based on risks and return to resource allocation and new groups have been identified (i.e. Electronics, Materials Supply & Marine Logistics and Others).