AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
Segment Reporting
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.... (c) make more informed judgements about the enterprise as a whole. Many enterprises provide groups of products and services or operate in geographical areas that are subject to differing rates of profitability, opportunities for growth, future prospects, and risks. Information about different types of products and services of an enterprise and its operations in different geographical areas - often called segment information - is relevant to assessing the risks and returns of a diversified or multi-locational enterprise but may not be determinable from the aggregated data. Therefore, reporting of segment information is widely regarded as necessary for meeting the needs of users of financial statements. Scope 1. This Standard should be applied in presenting general purpose financial statements. 2. The requirements of this Standard are also applicable in case of consolidated financial statements. 3. An enterprise should comply with the requirements of this Standard fully and not selectively. 4. If a single financial report contains both consolidated financial statements and the separate financial statements of the parent, segment inf....
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.... 5.4 Enterprise revenue is revenue from sales to external customers as reported in the statement of profit and loss. 5.5 Segment revenue is the aggregate of (i) the portion of enterprise revenue that is directly attributable to a segment, (ii) the relevant portion of enterprise revenue that can be allocated on a reasonable basis to a segment, and (iii) revenue from transactions with other segments of the enterprise. Segment revenue does not include: (a) extraordinary items as defined in AS 5, Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies; (b) interest or dividend income, including interest earned on advances or loans to other segments unless the operations of the segment are primarily of a financial nature; and (c) gains on sales of investments or on extinguishment of debt unless the operations of the segment are primarily of a financial nature. 5.6 Segment expense is the aggregate of (i) the expense re....
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.... either are directly attributable to the segment or can be allocated to the segment on a reasonable basis. If the segment result of a segment includes interest or dividend income, its segment assets include the related receivables, loans, investments, or other interest or dividend generating assets. Segment assets do not include income tax assets. Segment assets are determined after deducting related allowances/provisions that are reported as direct offsets in the balance sheet of the enterprise. 5.9 Segment liabilities are those operating liabilities that result from the operating activities of a segment and that either are directly attributable to the segment or can be allocated to the segment on a reasonable basis. If the segment result of a segment includes interest expense, its segment liabilities include the related interest-bearing liabilities. Segment liabilities do not include income tax liabilities. 5.10 Segment accounting policies are the accounting policies adopted for preparing and presenting the financial statements of the enterprise as well as those accounting policies that relate specifically to segment reporting. 6. The factors in paragraph ....
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....ent groups of products and services of an enterprise and about its operations in particular geographical areas, and the usefulness of that information for assessing the risks and returns of the enterprise as a whole. 12. The predominant sources of risks affect how most enterprises are organised and managed. Therefore, the organisational structure of an enterprise and its internal financial reporting system are normally the basis for identifying its segments. 13. The definitions of segment revenue, segment expense, segment assets and segment liabilities include amounts of such items that are directly attributable to a segment and amounts of such items that can be allocated to a segment on a reasonable basis. An enterprise looks to its internal financial reporting system as the starting point for identifying those items that can be directly attributed, or reasonably allocated, to segments. There is thus a presumption that amounts that have been identified with segments for internal financial reporting purposes are directly attributable or reasonably allocable to segments for the purpose of measuring the segment revenue, segment expense, segment assets, and segment liabilities o....
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....y allocate, the interest-bearing liabilities to segments. 17. Segment revenue, segment expense, segment assets and segment liabilities are determined before intra-enterprise balances and intra-enterprise transactions are eliminated as part of the process of preparation of enterprise financial statements, except to the extent that such intra-enterprise balances and transactions are within a single segment. 18. While the accounting policies used in preparing and presenting the financial statements of the enterprise as a whole are also the fundamental segment accounting policies, segment accounting policies include, in addition, policies that relate specifically to segment reporting, such as identification of segments, method of pricing inter-segment transfers, and basis for allocating revenues and expenses to segments. Identifying Reportable Segments Primary and Secondary Segment Reporting Formats 19. The dominant source and nature of risks and returns of an enterprise should govern whether its primary segment reporting format will be business segments or geographical segments. If the risks and returns of an enterprise are affected predominantly by differences in the p....
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....prise and its internal financial reporting system normally provide the best evidence of the predominant source of risks and returns of the enterprise for the purpose of its segment reporting. Therefore, except in rare circumstances, an enterprise will report segment information in its financial statements on the same basis as it reports internally to top management. Its predominant source of risks and returns becomes its primary segment reporting format. Its secondary source of risks and returns becomes its secondary segment reporting format. 22. A 'matrix presentation - both business segments and geographical segments as primary segment reporting formats with full segment disclosures on each basis -- will often provide useful information if risks and returns of an enterprise are strongly affected both by differences in the products and services it produces and by differences in the geographical areas in which it operates. This Standard does not require, but does not prohibit, a 'matrix presentation . 23. In some cases, organisation and internal reporting of an enterprise may have developed along lines unrelated to both the types of products and services it produces, and the ....
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....itions in paragraph 5 but others are not, sub-paragraph (b) below should be applied only to those internal segments that do not meet the definitions in paragraph 5 (that is, an internally reported segment that meets the definition should not be further segmented); (b) for those segments reported internally to the directors and management that do not satisfy the definitions in paragraph 5, management of the enterprise should look to the next lower level of internal segmentation that reports information along product and service lines or geographical lines, as appropriate under the definitions in paragraph 5; and (c) if such an internally reported lower-level segment meets the definition of business segment or geographical segment based on the factors in paragraph 5, the criteria in paragraph 27 for identifying reportable segments should be applied to that segment. 26. Under this Standard, most enterprises will identify their business and geographical segments as the organisational units for which information is reported to the board of the directors (particularly the non-executive directors, if any) and to the ch....
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....aph 27, until at least 75 per cent of total enterprise revenue is included in reportable segments. 30. The 10 per cent thresholds in this Standard are not intended to be a guide for determining materiality for any aspect of financial reporting other than identifying reportable business and geographical segments. Illustration II attached to this Standard presents an illustration of the determination of reportable segments as per paragraphs 27-29. 31. A segment identified as a reportable segment in the immediately preceding period because it satisfied the relevant 10 per cent thresholds should continue to be a reportable segment for the current period notwithstanding that its revenue, result, and assets all no longer meet the 10 per cent thresholds. 32. If a segment is identified as a reportable segment in the current period because it satisfies the relevant 10 per cent thresholds, preceding period segment data that is presented for comparative purposes should, unless it is impracticable to do so, be restated to reflect the newly reportable segment as a separate segment, even if that segment did not satisfy the 10 per cent thresholds in the preceding period. Segment Ac....
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.... allocation that should be adopted by all enterprises; nor is it appropriate to force allocation of enterprise asset, liability, revenue, and expense items that relate jointly to two or more segments, if the only basis for making those allocations is arbitrary. At the same time, the definitions of segment revenue, segment expense, segment assets, and segment liabilities are interrelated, and the resulting allocations should be consistent. Therefore, jointly used assets and liabilities are allocated to segments if, and only if, their related revenues and expenses also are allocated to those segments. For example, an asset is included in segment assets if, and only if, the related depreciation or amortisation is included in segment expense. Disclosure 38. Paragraphs 39-46 specify the disclosures required for reportable segments for primary segment reporting format of an enterprise. Paragraphs 47-51 identify the disclosures required for secondary reporting format of an enterprise. Enterprises are encouraged to make all of the primary-segment disclosures identified in paragraphs 39-46 for each reportable secondary segment although paragraphs 47-51 require considerably less disclo....
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.... clear description of the basis of measurement. 42. An example of a measure of segment performance above segment result in the statement of profit and loss is gross margin on sales. Examples of measures of segment performance below segment result in the statement of profit and loss are profit or loss from ordinary activities (either before or after income taxes) and net profit or loss. 43. Accounting Standard 5, 'Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies requires that when items of income and expense within profit or loss from ordinary activities are of such size, nature or incidence that their disclosure is relevant to explain the performance of the enterprise for the period, the nature and amount of such items should be disclosed separately". Examples of such items include writedowns of inventories, provisions for restructuring, disposals of fixed assets and long-term investments, legislative changes having retrospective application, litigation settlements, and reversal of provisions. An enterprise is encouraged, but not required, to disclose the nature and amount of any items of segment revenue and segment expense that are of ....
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....48; (b) if primary format of an enterprise is geographical segments based on location of assets (where the products of the enterprise are produced or where its service rendering operations are based), the required secondary-format disclosures are identified in paragraphs 49 and 50; (c) if primary format of an enterprise is geographical segments based on the location of its customers (where its products are sold or services are rendered), the required secondary-format disclosures are identified in paragraphs 49 and 51. 48. If primary format of an enterprise for reporting segment information is business segments, it should also report the following information: (a) segment revenue from external customers by geographical area based on the geographical location of its customers, for each geographical segment whose revenue from sales to external customers is 10 per cent or more of enterprise revenue; (b) the total carrying amount of segment assets by geographical location of assets, for each geographical segment whose segment assets are 10 per cent o....
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....d during more than one period (tangible and intangible fixed assets) by location of the assets. Illustrative Segment Disclosures 52. Illustration III attached to this Standard illustrates the disclosures for primary and secondary formats that are required by this Standard. Other Disclosures 53. In measuring and reporting segment revenue from transactions with other segments, inter-segment transfers should be measured on the basis that the enterprise actually used to price those transfers. The basis of pricing inter-segment transfers and any change therein should be disclosed in the financial statements. 54. Changes in accounting policies adopted for segment reporting that have a material effect on segment information should be disclosed. Such disclosure should include a description of the nature of the change, and the financial effect of the change if it is reasonably determinable. 55. AS 5 requires that changes in accounting policies adopted by the enterprise should be made only if required by statute, or for compliance with an accounting standard, or if it is considered that the change would result in a more appropriate presentation of events or transactio....
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.... Do the segments reflected in the management reporting system meet the requisite definitions of business or geographical segments Use the segments reported to the board of directors and CEO a business segments or geographical segments (para 20) Do some management reporting segments meet the definitions in para 5 (para 20) For those segments that do not meet the definitions, go to the next lower level of internal segmentation that reports information along product/service lines or geographical lines (para 25) Those segments may be reportable segments Yes No Does the segment exceed the quantitative thresholds (para 27) This segment is a reportable segment (a) This segment may be separately reported despite its size. (b) If not separately rreported, is is unallocated reconciling item (para 28) Yes No Does total segment external revenue exceed 75% of total enterprise revenue (para 29) Identify additional segment until 75% threshold is reached (para) No Illustration II Illustration on Determination of Reportable Segments [Paragraphs 27-29] This illustration does not form part of the Acco....
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....t that combined result in loss (i.e., Rs. 100,000) is greater. Therefore, the individual segment result as a percentage of Rs. 100,000 needs to be examined. In accordance with paragraph 27(b), Segments B and C are reportable segments as their segment result is more than the threshold limit of 10%. (c) Segments A, B and D are reportable segments as per paragraph 27(c), as their segment assets are more than 10% of the total segment assets. Thus, Segments A, B, C and D are reportable segments in terms of the criteria laid down in paragraph 27. Paragraph 28 of the Statement gives an option to the management of the enterprise to designate any segment as a reportable segment. In the given case, it is presumed that the management decides to designate Segment E as a reportable segment. Paragraph 29 requires that if total external revenue attributable to reportable segments identified as aforesaid constitutes less than 75% of the total enterprise revenue, additional segments should be identified as reportable segments even if they do not meet the 10% thresholds in paragraph 27, until at least 75% of total enterprise revenue is included in rep....
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....7) (9) Operating profit 23 15 Interest expense (4) (4) Interest income 2 3 Income taxes (7) (4) Profit from ordinary activities 14 10 Extraordinary loss: uninsured earthquake damage to factory (3) (3) Net profit 14 7 OTHER INFORMATION  ....
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....ublishing and computer software development operations are conducted in India. In the European Union, the Company operates paper and office products manufacturing facilities and sales offices in the following countries: France, Belgium, Germany and the U.K. Operations in Canada and the United States are essentially similar and consist of manufacturing papers and newsprint that are sold entirely within those two countries. Operations in Indonesia include the production of paper pulp and the manufacture of writing and publishing papers and office products, almost all of which is sold outside Indonesia, both to other segments of the company and to external customers. Sales by market: The following table shows the distribution of the Company s consolidated sales by geographical market, regardless of where the goods were produced: Sales Revenue by Geographical Market Current Year Previous Year India 19 22 European Union 30 31 Canada and the United States 28 21 Mexico and South America 6 2 Southeast Asia (principally Japan and Taiwan) 18 14 101 90 Assets and additions to tangible and ....
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....s. 3,00,000 caused by earthquake damage to a paper mill in India during the previous year. Illustration IV Summary of Required Disclosure This illustration does not form part of the Accounting Standard. Its purpose is to summarise the disclosures required by paragraphs 38-59 for each of the three possible primary segment reporting formats. Figures in parentheses refer to paragraph numbers of the relevant paragraphs in the text. Primary format is business segments Primary format is geographcal segments by location of assets Primary format is geographical segments by location of customers Required Primary Disclosures Required Primary Disclosures Required Primary Disclosures Revenue from external customers by business segment [40(a)] Revenue from external customers by location of assets [40(a)] Revenue from external customers by location of customers [40(a)] Revenue from transactions with other segments by business segment [40(a)] Revenue from transactions with other segments by location of assets [40(a)] Revenue from transactions with other segments by location of customers [40(a)] Segment result by business segment [40(b)] Segmen....