INDIAN ACCOUNTING STANDARD 108
OPERATING SEGMENTS
CONTENTS
from paragraph
CORE PRINCIPLE 1
SCOPE 2
OPERATING SEGMENTS 5
REPORTABLE SEGMENTS 11
Aggregation criteria 12
Quantitative thresholds 13
DISCLOSURE 20
General information 22
Information about profit or loss, assets and
liabilities 23
MEASUREMENT 25
Reconciliations 28
Restatement of previously reported information 29
ENTITY-WIDE DISCLOSURES 31
Information about products and services 32
Information about geographical areas 33
Information about major customers 34
APPENDICES
Appendix A- Defined term
Appendix 1- Comparison with IFRS 8, Operating
Segments
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.)
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.
Scope
2 This Accounting Standard shall apply to companies to which Indian
Accounting Standards (Ind ASs) notified under the Companies Act
apply.
[Refer Appendix 1]
3 If an entity that is not required to apply this Ind AS chooses to
disclose information about segments that does not comply with this
Ind AS, 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 Ind AS as well
as the parent’s separate financial statements, segment information
is required only in the consolidated financial statements.
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),
# This Ind AS was notified vide G.S.R. 111(E) dated 16th February, 2015.
Ind AS 108, Operating Segments
(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 Ind AS, 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
Ind AS 108, Operating Segments
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.
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.
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 Ind AS, the segments have similar economic
Ind AS 108, Operating Segments
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.
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.
Ind AS 108, Operating Segments
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 in 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.
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.
Ind AS 108, Operating Segments
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.
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) ;
(aa) the judgements made by management in applying the
aggregation criteria in paragraph 12. This includes a brief
description of the operating segments that have been
aggregated in this way and the economic indicators that have
been assessed in determining that the aggregated operating
segments share similar economic characteristics; and
Ind AS 108, Operating Segments
(b) types of products and services from which each reportable
segment derives its revenues.
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 operating 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
Ind AS 108, Operating Segments
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, net defined benefit
assets (see Ind AS 19, Employee Benefits) and rights arising
under insurance contracts.
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
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.
Ind AS 108, Operating Segments
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.
Ind AS 108, Operating Segments
(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.
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 if the segment assets are reported in accordance with
paragraph 23.
(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.
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.
Entity-wide disclosures
31 Paragraphs 32–34 apply to all entities subject to this Ind AS
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 Ind AS.
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.
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.
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.
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 Ind
AS, 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 the 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.
Ind AS 108, Operating Segments
Appendix A
Defined term
This Appendix is an integral part of the Ind AS.
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.
Ind AS 108, Operating Segments
Appendix 1
Note: This Appendix is not a part of the Indian Accounting Standard. The
purpose of this Appendix is only to bring out the major differences, if any, between
Indian Accounting Standard (Ind AS) 108 and the corresponding International
Financial Reporting Standard (IFRS) 8, Operating Segments, issued by the
International Accounting Standards Board.
Comparison with IFRS 8, Operating Segments
1. The transitional provisions given in IFRS 108 has not been given in
Ind AS 108, since all transitional provisions related to Ind ASs,
wherever considered appropriate, have been included in Ind AS 101,
First-time Adoption of Indian Accounting Standards, corresponding
to IFRS 1, First-time Adoption of International Financial Reporting
Standards.
2. Different terminology is used, as used in existing laws eg, the term
‘balance sheet’ is used instead of ‘Statement of financial position’
and ‘Statement of profit and loss’ is used instead of ‘Statement of
comprehensive income’.
3. Paragraph 2 of IFRS 8 requires that the standard shall apply to:
(a) the separate or individual financial statements of an entity:
(i) whose debt or equity instruments are traded in a public
market (a domestic or foreign stock exchange or an
over-the-counter market, including local and regional
markets), or
(ii) that files, or is in the process of filing, its financial
statements with a securities commission or other
regulatory organisation for the purpose of issuing any
class of instruments in a public market; and
(b) the consolidated financial statements of a group with a parent:
(i) whose debt or equity instruments are traded in a public
market (a domestic or foreign stock exchange or an
over-the-counter market, including local and regional
markets), or
Ind AS 108, Operating Segments
(ii) that files, or is in the process of filing, the consolidated
financial statements with a securities commission or
other regulatory organisation for the purpose of issuing
any class of instruments in a public market.
The above have been deleted in the Ind AS as the applicability or
exemptions to the Indian Accounting Standards is governed by the
Companies Act and the Rules made thereunder. However, the
paragraph number has been retained in Ind AS 108 to maintain
consistency with paragraph numbers of IFRS 8.
