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

  1. #1
    IND-AS
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    Thumbs up 08 - Indian Accounting Standard (Ind AS) 108 - Operating Segments

    Indian Accounting Standard (Ind AS) 108

    Operating Segments

    (This Indian Accounting Standard includes paragraphs set in bold type and plain type, which have equal authority. Paragraphs in bold type indicate the main principles. )

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

    Core principle of Indian Accounting Standard (Ind AS) 108

    Operating Segments


    Core principle

    1. An entity shall disclose information to enable users of its financial statements to evaluate the nature and financial effects of the business activities in which it engages and the economic environments in which it operates.

  3. #3
    IND-AS
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    Thumbs up Scope of Indian Accounting Standard (Ind AS) 108 - Operating Segments

    Scope of Indian Accounting Standard (Ind AS) 108

    Operating Segments


    Scope

    2. This Accounting Standard shall apply to companies to which Accounting Standards notified under Part I of the Companies (Accounting Standards) Rules _____- apply.

    3. If an entity that is not required to apply this Indian Accounting Standard chooses to disclose information about segments that does not comply with this Indian Accounting Standard, it shall not describe the information as segment information.

    4. If a financial report contains both the consolidated financial statements of a parent that is within the scope of this Indian Accounting Standard as well as the parent’s separate financial statements, segment information is required only in the consolidated financial statements.


  4. #4
    IND-AS
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    Thumbs up Operating segments of Indian Accounting Standard (Ind AS) 108 - Operating Segments

    Operating segments of Indian Accounting Standard (Ind AS) 108

    Operating Segments


    Operating segments

    5. 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.

    An operating segment may engage in business activities for which it has yet to earn revenues, for example, start -up operations may be operating segments before earning revenues.

    6. Not every part of an entity is necessarily an operating segment or part of an operating segment. For example, a corporate headquarters or some functional departments may not earn revenues or may earn revenues that are only incidental to the activities of the entity and would not be operating segments. For the purposes of this Indian Accounting Standard, an entity’s post-employment benefit plans are not operating segments .

    7. The term ‘chief operating decision maker’ identifies a function, not necessarily a manager with a specific title. That function is to allocate resources to and assess the performance of the operating segments of an entity. Often the chief operating decision maker of an entity is its chief executive officer or chief operating officer but, for example, it may be a group of executive directors or others.

    8. For many entities, the three characteristics of operating segments described in paragraph 5 clearly identify its operating segments. However, an entity may produce reports in which its business activities are presented in a variety of ways. If the chief operating decision maker uses more than one set of segment information, other factors may identify a single set of components as constituting an entity’s operating segments, including the nature of the business activities of each component, the existence of managers responsible for them, and information presented to the board of directors.

    9. Generally, an operating segment has a segment manager who is directly accountable to and maintains regular contact with the chief operating decision maker to discuss operating activities, financial results, forecasts, or plans for the segment. The term ‘segment manager’ identifies a function, not necessarily a manager with a specific title. The chief operating decision maker also may be the segment manager for some operating segments. A single manager may be the segment manager for more than one operating segment. If the characteristics in paragraph 5 apply to more than one set of components of an organisation but there is only one set for which segment managers are held responsible, that set of components constitutes the operating segments.

    10. The characteristics in paragraph 5 may apply to two or more overlapping sets of components for which managers are held responsible. That structure is sometimes referred to as a matrix form of organisation. For example, in some entities, some managers are responsible for different product and service lines worldwide, whereas other managers are responsible for specific geographical areas. The chief operating decision maker regularly reviews the operating results of both sets of components, and financial information is available for both. In that situation, the entity shall determine which set of components constitutes the operating segments by reference to the core principle.


  5. #5
    IND-AS
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    Thumbs up Reportable segments of Indian Accounting Standard (Ind AS) 108 - Operating Segments

    Reportable segments of Indian Accounting Standard (Ind AS) 108

    Operating Segments


    Reportable segments

    11. An entity shall report separately information about each operating segment that:

    (a) has been identified in accordance with paragraphs 5 –10 or results from aggregating two or more of those segments in accordance with paragraph 12, and

    (b) exceeds the quantitative thresholds in paragraph 13.

    Paragraphs 14–19 specify other situations in which separate information about an operating segment shall be reported.


  6. #6
    IND-AS
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    Thumbs up Aggregation criteria of Indian Accounting Standard (Ind AS) 108 - Operating Segments

    Aggregation criteria of Indian Accounting Standard (Ind AS) 108

    Operating Segments


    Aggregation criteria

    12. Operating segments often exhibit similar long-term financial performance if they have similar economic characteristics. For example, similar long -term average gross margins for two operating segments would be expected if their economic characteristics were similar. Two or more operating segments may be aggregated into a single operating segment if aggregation is consistent with the core principle of this Indian Accounting Standard, the segments have similar economic characteristics, and the segments are similar in each of the following respects:

    (a) the nature of the products and services;
    (b) the nature of the production processes;
    (c) the type or class of customer for their products and services;
    (d) the methods used to distribute their products or provide their services; and
    (e) if applicable, the nature of the regulatory environment, for example, banking, insurance or public utilities.


  7. #7
    IND-AS
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    Thumbs up Quantitative thresholds of Indian Accounting Standard (Ind AS) 108 - Operating Segments

    Quantitative thresholds of Indian Accounting Standard (Ind AS) 108

    Operating Segments


    Quantitative thresholds

    13. An entity shall report separately information about an operating segment that meets any of the following quantitative thresholds:

    (a) Its reported revenue, including both sales to external customers and intersegment sales or transfers, is 10 per cent or more of the combined revenue, internal and external, of all operating segments.

    (b) The absolute amount of its reported profit or loss is 10 per cent or more of the greater, in absolute amount, of (i) the combined reported profit of all operating segments that did not report a loss and (ii) the combined reported loss of all operating segments that reported a loss.

    (c) Its assets are 10 per cent or more of the combined assets of all operating segments.

    Operating segments that do not meet any of the quantitative thresholds may be considered reportable, and separately disclosed, if management believes that information about the segment would be useful to users of the financial statements.

    14. An entity may combine information about operating segments that do not meet the quantitative thresholds with information about other operating segments that do not meet the quantitative thresholds to produce a reportable segment only if the operating segments have similar economic characteristics and share a majority of the aggregation criteria listed in paragraph 12.

    15. If the total external revenue reported by operating segments constitutes less than 75 per cent of the entity’s revenue, additional operating segments shall be identified as reportable segments (even if they do not meet the criteria in paragraph 13) until at least 75 per cent of the entity’s revenue is included in reportable segments.

    16. Information about other business activities and operating segments that are not reportable shall be combined and disclosed i n an ‘all other segments’ category separately from other reconciling items in the reconciliations required by paragraph 28. The sources of the revenue included in the ‘all other segments’ category shall be described.

    17. If management judges that an operating segment identified as a reportable segment in the immediately preceding period is of continuing significance, information about that segment shall continue to be reported separately in the current period even if it no longer meets the criteria for reportability in paragraph 13.

    18. If an operating segment is identified as a reportable segment in the current period in accordance with the quantitative thresholds, segment data for a prior period presented for comparative purposes shall be restated to reflect the newly reportable segment as a separate segment, even if that segment did not satisfy the criteria for reportability in paragraph 13 in the prior period, unless the necessary information is not available and the cost to develop it would be excessive.

    19. There may be a practical limit to the number of reportable segments that an entity separately discloses beyond which segment information may become too detailed. Although no precise limit has been determined, as the number of segments that are reportable in accordance with paragraphs 13–18 increases above ten, the entity should consider whether a practical limit has been reached.


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

    Disclosure of Indian Accounting Standard (Ind AS) 108

    Operating Segments


    Disclosure

    20. An entity shall disclose information to enable users of its financial statements to evaluate the nature and financial effects of the business activities in which it engages and the economic environments in which it operates.

    21. To give effect to the principle in paragraph 20, an entity shall disclose the following for each period for which a statement of profit and loss is presented:

    (a) general information as described in paragraph 22;

    (b) information about reported segment profit or loss, including specified revenues and expenses included in reported segment profit or loss, segment assets, segment liabilities and the basis of measurement, as described in paragraphs 23–27; and

    (c) reconciliations of the totals of segment revenues, reported segment profit or loss, segment assets, segment liabilities and other material segment items to corresponding entity amounts as described in paragraph 28.

    Reconciliations of the amounts in the balance sheet for reportable segments to the amounts in the entity’s balance sheet are required for each date at which a balance sheet is presented. Information for prior periods shall be restated as described in paragraphs 29 and 30.


  9. #9
    IND-AS
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    Thumbs up General information of Indian Accounting Standard (Ind AS) 108 - Operating Segments

    General information of Indian Accounting Standard (Ind AS) 108

    Operating Segments


    General information

    22. An entity shall disclose the following general information:

    (a) factors used to identify the entity’s reportable segments, including the basis of organisation (for example, whether management has chosen to organise the entity around differences in products and services, geographical areas, regulatory environments, or a combination of factors and whether operating segments have been aggregated), and

    (b) types of products and services from which each reportable segment derives its revenues.


  10. #10
    IND-AS
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    Thumbs up Information about profit or loss, assets and liabilities of Indian Accounting Standard (Ind AS) 108 - Operating Segments

    Information about profit or loss, assets and liabilities of Indian Accounting Standard (Ind AS) 108

    Operating Segments


    Information about profit or loss, assets and liabilities

    23. An entity shall report a measure of profit or loss for each reportable segment. An entity shall report a measure of total assets and liabilities for each reportable segment if such amounts are regularly provided to the chief operating decision maker. An entity shall also disclose the following about each reportable segment if the specified amounts are included in the measure of segment profit or loss reviewed by the chief operating decision maker, or are otherwise regularly provided to the chief operating decision maker, even if not included in that measure of segment profit or loss:

    (a) revenues from external customers;
    (b) revenues from transactions with other ope rating segments of the same entity;
    (c) interest revenue;
    (d) interest expense;

    (e) depreciation and amortisation;
    (f) material items of income and expense disclosed in accordance with paragraph 97 of Ind AS 1 Presentation of Financial Statements ;
    (g) the entity’s interest in the profit or loss of associates and joint ventures accounted for by the equity method;
    (h) income tax expense or income; and
    (i) material non-cash items other than depreciation and amortisation.

    An entity shall report interest revenue separately from interest expense for each reportable segment unless a majority of the segment’s revenues are from interest and the chief operating decision maker relies primarily on net interest revenue to assess the performance of the segment and make decisions about resources to be allocated to the segment. In that situation, an entity may report that segment’s interest revenue net of its interest expense and disclose that it has done so.

    24. An entity shall disclose the following about each reportable segment if the specified amounts are included in the measure of segment assets reviewed by the chief operating decision maker or are otherwise regularly provided to the chief operating decision maker, even if not included in the measure of segment assets:

    (a) the amount of investment in associates and joint ventures accounted for by the equity method, and

    (b) the amounts of additions to non-current assets1 other than financial instruments, deferred tax assets, post -employment benefit assets (see Ind AS 19 Employee Benefits paragraphs 54–58) and rights arising under insurance contracts.


    Note -

    1
    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.

    Last edited by IND-AS; 02-03-2011 at 01:10 PM.

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