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Thread: 08 - Indian Accounting Standard (Ind AS) 108 - Operating Segments

  1. #11
    IND-AS
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    Thumbs up Measurement of Indian Accounting Standard (Ind AS) 108 - Operating Segments

    Measurement of Indian Accounting Standard (Ind AS) 108

    Operating Segments


    Measurement

    25. The amount of each segment item reported shall be the measure reported to the chief operating decision maker for the purposes of making decisions about allocating resources to the segment and assessing its performance. Adjustments and eliminations made in preparing an entity’s financial statements and allocations of revenues, expenses, and gains or losses shall be included in determining reported segment profit or loss only if they are included in the measure of the segment’s profit or loss that is used by the chief operating decision maker. Similarly, only those assets and liabilities that are included in the measures of the segment’s assets and segment’s liabilities that are used by the chief operating decision maker shall be reported for that segment. If amounts are allocated to reported segment profit or loss, assets or liabilities, those amounts shall be allocated on a reasonable basis.

    26. If the chief operating decision maker uses only one measure of an operating segment’s profit or loss, the segment’s assets or the segment’s liabilities in assessing segment performance and deciding how to allocate resources, segment profit or loss, assets and liabilities shall be reported at those measures. If the chief operating decision maker uses more than one measure of an operating segment’s profit or loss, the segment’s assets or the segment’s liabilities, the reported measures shall be those that management believes are determined in accordance with the measurement principles most consistent with those used in measuring the corresponding amounts in the entity’s financial statements.

    27. An entity shall provide an explanation of the measurements of segment profit or loss, segment assets and segment liabilities for each reportable segment. At a minimum, an entity shall disclose the following:

    (a) the basis of accounting for any transactions between reportable segments.

    (b) the nature of any differences between the measurements of the reportable segments’ profits or losses and the entity’s profit or loss before income tax expense or income and discontinued operations (if not apparent from the reconciliations described in paragraph 28). Those differences could include accounting policies and policies for allocation of centrally incurred costs that are necessary for an understanding of the reported segment information.

    (c) the nature of any differences between the measurements of the reportable segments’ assets and the entity’s assets (if not apparent from the reconciliations described in paragraph 28). Those differences could include accounting policies and policies for allocation of jointly used assets that are necessary for an understanding of the reported segment information.

    (d) the nature of any differences between the measurements of the reportable segments’ liabilities and the entity’s liabilities ( if not apparent from the reconciliations described in paragraph 28). Those differences could include accounting policies and policies for allocation of jointly utilised liabilities that are necessary for an understanding of the reported segment information .

    (e) the nature of any changes from prior periods in the measurement methods used to determine reported segment profit or loss and the effect, if any, of those changes on the measure of segment profit or loss.

    (f) the nature and effect of any asymmetrical allocations to reportable segments. For example, an entity might allocate depreciation expense to a segment without allocating the related depreciable assets to that segment.


  2. #12
    IND-AS
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    Thumbs up Reconciliations of Indian Accounting Standard (Ind AS) 108 - Operating Segments

    Reconciliations of Indian Accounting Standard (Ind AS) 108

    Operating Segments


    Reconciliations

    28. An entity shall provide reconciliations of all of the following:

    (a) the total of the reportable segments’ revenues to the entity’s revenue.
    (b) the total of the reportable segments’ measures of profit or loss to the entity’s profit or loss before tax expense (tax income) and discontinued operations. However, if an entity allocates to reportable segments items such as tax expense (tax income), the entity may reconcile the total of the segments’ measures of profit or loss to the entity’s profit or loss after those items.

    (c) the total of the reportable segments’ assets to the entity’s assets.
    (d) the total of the reportable segments’ liabilities to the entity’s liabilities if segment liabilities are reported in accordance with paragraph 23.
    (e) the total of the reportable segments’ amounts for every other material item of information disclosed to the corresponding amount for the entity.

    All material reconciling items shall be separately identified and described. For example, the amount of each material adjustment needed to reconcile reportable segment profit or loss to the entity’s profit or loss arising from different accounting policies shall be separately identified and described.


  3. #13
    IND-AS
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    Thumbs up Restatement of previously reported information of Indian Accounting Standard (Ind AS) 108 - Operating Segments

    Restatement of previously reported information of Indian Accounting Standard (Ind AS) 108

    Operating Segments


    Restatement of previously reported information

    29. If an entity changes the structure of its internal organisation in a manner that causes the composition of its reportable segments to change, the corresponding information for earlier periods, including interim periods, shall be restated unless the information is not available and the cost to develop it would be excessive. The determination of whether the information is not available and the cost to develop it would be excessive shall be made for each individual item of disclosure. Following a change in the composition of its reportable segments, an entity shall disclose whether it has restated the corresponding items of segment information for earlier periods.

    30. If an entity has changed the structure of its internal organisation in a manner that causes the composition of its reportable segments to change and if segment information for earlier periods, including interim periods, is not restated to reflect the change, the entity shall disclose in the year in which the change occurs segment information for the current period on both the old basis and the new basis of segmentation, unless the necessary information is not available and the cost to develop it would be excessive.


  4. #14
    IND-AS
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    Thumbs up Entity-wide disclosures of Indian Accounting Standard (Ind AS) 108 - Operating Segments

    Entity-wide disclosures of Indian Accounting Standard (Ind AS) 108

    Operating Segments


    Entity-wide disclosures

    31. Paragraphs 32–34 apply to all entities subject to this Indian Accounting Standard including those entities that have a single reportable segment.

    Some entities’ business activities are not organised on the basis of differences in related products and services or differences in geographical areas of operations. Such an entity’s reportable segments may report revenues from a broad range of essentially different products and services, or more than one of its reportable segments may provide essentially the same products and services. Similarly, an entity’s reportable segments may hold assets in different geographical areas and report revenues from customers in different geographical areas, or more than one of its reportable segments may operate in the same geographical area. Information required by paragraphs 32 –34 shall be provided only if it is not provided as part of the reportable segment information required by this Indian Accounting Standard.


  5. #15
    IND-AS
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    Thumbs up Information about products and services of Indian Accounting Standard (Ind AS) 108 - Operating Segments

    Information about products and services of Indian Accounting Standard (Ind AS) 108

    Operating Segments


    Information about products and services

    32. An entity shall report the revenues from external customers for each product and service, or each group of similar products and services, unless the necessary information is not available and the cost to develop it would be excessive, in which case that fact shall be disclosed. The amounts of revenues reported shall be based on the financial information used to produce the entity’s financial statements.


  6. #16
    IND-AS
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    Thumbs up Information about geographical areas of Indian Accounting Standard (Ind AS) 108 - Operating Segments

    Information about geographical areas of Indian Accounting Standard (Ind AS) 108

    Operating Segments


    Information about geographical areas

    33. An entity shall report the following geographical information, unless the necessary information is not available and the cost to develop it would be excessive:

    (a) revenues from external customers (i) attributed to the entity’s country of domicile and (ii) attributed to all foreign countries in total from which the entity derives revenues. If revenues from external customers attributed to an individual foreign country are material, those revenues shall be disclosed separately. An entity shall disclose the basis for attributing revenues from external customers to individual countries.

    (b) non-current assets2 other than financial instruments, deferred tax assets, post-employment benefit assets, and rights arising under insurance contracts (i) located in the entity’s country of domicile and (ii) located in all foreign countries in total in which the entity holds assets. If assets in an individual foreign country are material, those assets shall be disclosed separately.

    The amounts reported shall be based on the financial information that is used to produce the entity’s financial statements. If the necessary information is not available and the cost to develop it would be excessive, that fact shall be disclosed. An entity may provide, in addition to the information required by this paragraph, subtotals of geographical information about groups of countries.

    Note -

    2
    For assets classified according to a liquidity presentation, non -current assets are assets that
    include amounts expected to be recovered more than twelve months after the reporting period.

  7. #17
    IND-AS
    Guest

    Thumbs up Information about major customers of Indian Accounting Standard (Ind AS) 108 - Operating Segments

    Information about major customers of Indian Accounting Standard (Ind AS) 108

    Operating Segments


    Information about major customers

    34. An entity shall provide information about the extent of its reliance on its major customers. If revenues from transactions with a single external customer amount to 10 per cent or more of an entity’s revenues, the entity shall disclose that fact, the total amount of revenues from each such customer, and the identity of the segment or segments reporting the revenues. The entity need not disclose the identity of a major customer or the amount of revenues that each segment reports from that customer. For the purposes of this Indian Accounting Standard, a group of entities known to a reporting entity to be under common control shall be considered a single customer. However, judgement is required to assess whether a government (including government agencies and similar bodies whether local, national or international) and entities known to t he reporting entity to be under the control of that government are considered a single customer. In assessing this, the reporting entity shall consider the extent of economic integration between those entities.


  8. #18
    IND-AS
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    Thumbs up Appendix - A of Indian Accounting Standard (Ind AS) 108 - Operating Segments

    Appendix - A of Indian Accounting Standard (Ind AS) 108

    Operating Segments


    Appendix - A

    Defined term


    operating segment

    An operating segment is a component of an entity:

    (a) that engages in business activities from which it may earn revenues and incur expenses (including
    revenues and expenses relating to transactions with other components of the same entity),

    (b) whose operating results are regularly reviewed by the entity’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance, and

    (c) for which discrete financial information is available.


  9. #19
    IND-AS
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    Thumbs up Appendix - B of Indian Accounting Standard (Ind AS) 108 - Operating Segments

    Appendix - B of Indian Accounting Standard (Ind AS) 108

    Operating Segments


    Appendix - B

    Guidance on implementing
    Ind AS 108 Operating Segments


    This guidance accompanies, but is not part of, Ind AS 108.

    Introduction


    IG1. This implementation guidance provides examples that illustrate the disclosures required by Ind AS 108 and a diagram to assist in identifying reportable segments. The formats in the illustrations are not requirements. A format that provides the information in the most understandable manner in the specific circumstances is encouraged. The following illustrations are for a single hypothetical entity referred to as Diversified Company.


  10. #20
    IND-AS
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    Thumbs up Descriptive information about an entity’s reportable segments of Indian Accounting Standard (Ind AS) 108 - Operating Segments

    Descriptive information about an entity’s reportable segments of Indian Accounting Standard (Ind AS) 108

    Operating Segments


    Appendix - B


    Descriptive information about an entity’s reportable segments

    IG2. The following illustrates the disclosure of descriptive information about an entity’s reportable segments (the paragraph references are to the relevant requirements in the Indian Accounting Standard).

    Description of the types of products and services from which each reportable segment derives its revenues (paragraph 22(b))

    Diversified Company has five reportable segments: car parts, motor vessels, software, electronics and finance. The car parts segment produces replacement parts for sale to car parts retailers. The motor vessels segment produces small motor vessels to serve the offshore oil industry and similar businesses. The software segment produces application software for sale to computer manufacturers and retailers. The electronics segment produces integrated circuits and related products for sale to computer manufacturers. The finance segment is responsible for portions of the company’s financial operations including financing customer purchases of products from other segments and property lending operations.

    Measurement of operating segment profit or loss, assets and liabilities (paragraph 27)

    The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies except that pension expense for each operating segment is recognised and measured on the basis of cash payments to the pension plan. Diversified Company evaluates performance on the basis of profit or loss from operations before tax expense not including non-recurring gains and losses and foreign exchange gains and losses.
    Diversified Company accounts for intersegment sales and transfers as if the sales or transfers were to third parties, ie at current market prices.

    Factors that management used to identify the entity’s reportable segments (paragraph 22(a))

    Diversified Company’s reportable segments are strategic business units that offer different products and services. They are managed separately because each business requires different technology and marketing strategies. Most of the businesses were acquired as individual units, and the management at the time of the acquisition was retained.


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