IND AS : 108 OPERATING
SEGMENTS
BY HARSHAD .B. BHUDIA
(ARTICLE ASSISSTANT)
IND AS 108 – APLLICATION SUMMARY
• IDENTIFY THE C.O.D.M.
• IDENTIFY THE OPERATING SEGMENTS
• DETERMINE THE REPORTABLE SEGMENTS
• DISCLOSE THE REQUIRED INFORMATION
*THERE ARE THE FIVE CONCEPTS WHICH ARE EXPLAINED THE IND
AS 108 IN DETAIL IN PEACEFUL MANNER ARE AS FOLLOWS:-
1. CONCEPT 1 :- MEANING OF OPERATING SEGMENTS
• As per the provision of IND AS 108, operating segment may be a product/ services which
is sold/ rendered by a company OR an area in which company operates it business.
• There is no specific definition on business segments (product/services) OR geographical
segment (Areas) in IND AS 108 as it is given AS=17.
• Under IND AS= 108, A segment may be an operating segment if the following 3
condition are satisfied :-
a. Condition I :-It should have capacity to generate revenues.
b. Condition II :- It should be reviewed by C.O.D.M. ( Chief Officer Decision Maker)
c. Condition III :- We have financial information to present for segment.
* C.O.D.M ( Chief Officer Decision Maker)
• As per the provision of INS AS : 108, CODM may be a person OR
team of directors.
• If any segment is to be indentified as an operating segment then it
should be in the CODM report for decision making . It can be also
said that segment report is prepared from management eyes.
2. CONCEPT 2 :- AGGREGATION OF SEGMENTS
• If any entity wants to aggregate some similar segments to report as
a single segment then we should consider the following factors
before Aggregating different segments:-
a) Production process should be same OR
b) Class of customer should be same OR
c) Method to distributr the services should be same OR
d) Regulatory environment should be same.
3. CONCEPT 3 :- REPORTABLE SEGMENTS
• As per the provisions, all the identified segments are not to be reported . We will report only those
segments that would satisfy at least one condition out of the following specified condition :-
• Condition I:- If segment revenue (Internal OR External) is 10% OR More of Total Segment
Revenue.
SEGMENT A B C D E TOTAL
REVENUE
EXTERNAL 10,000 20,000 60,000 1,20,000 5,000 2,15,000
INTERNAL - - 25,000 10,000 - 35,000
TOTAL 10,000 20,000 85,000 1,30,000 5,000 2,50,000
% of 4% 8% 34% 52% 2% 100%
Revenue
STATUS UR UR R R UN -
SEGMENT C and D are Reportable on the basis of Revenue.
OR
Condition II:- If segment Result are 10% OR More of Total
Segment Result.
SEGMENT A B C D E TOTAL
ASSETS 2,00,000 10,00,000 5,00,000 1,00,000 1,00,000 19,00,000
% of Asset 10.52% 52.6% 26.32% 5.26% 5.26% 100%
STATUS R R R R UN -
OR
Condition III:- If segment Result are 10% OR More of Total
Segment Result.
SEGMENT A B C D E TOTAL
RESULTS 10,000 10,000 1,000 (20,000) (25,000) (24,000)
SEGMENT IN PROFIT 21,000 WHICHEVER IS 45,000
HIGHER
SEGMENT IN LOSSES 45,000
% OF Results 22.22% 22.22% 2.22% 44.44% 55.55% 100%
(10,000/ (10,000/ (1,000/45, (20,000/45, (25,000/
45,000) 45,000) 000) 000) 45,000)
STATUS R R R R R
Conclusion:- Therefore, All segments are the Reportable.
* ADDITIONAL CONDITIONS TO BE CONSIDERED :-
1) If any segment becomes Unreportable in current year but it was reportable in
previous year, then we will include such segment in current year report for
comparision purpose even if it is reportable.
2) If any segment reportable in current year, but it was unreportable in previous
year then we should revise previous year segment Reportby including such
segment for comparision purpose.
3) As per provision of IND AS-108 ,reportable segment should cover 75% or more
of Total External sales in segment report otherwise, additional segments should be
included in segment report. It can be also be said that unreportable segments will
become Reportable to cover 75% sales.
4) As per the provisions of IND- AS:108 , any segment can be included in segment
report upon managements choice but up to practical limit.
4. CONCEPT 4 :- TREATMENT OF UNREPORTABLE
SEGMENTS
• All the unreportable segments can be disclosed in segment
report in Total under the heading of “OTHERS”. It can be
also said that we can aggregate all unreportable segments
under the heading of “OTHERS”.
5. CONCEPT 5 :- DISCLOSURES IN SEGMENT REPORT
• As per the provisions of IND AS108, the following 3 contents should in included in segment report.
1) GENERAL INFORMATION :-
a. The management has to explain basis to organize its different products or services.
b. The management has to explain basis to aggregate the similar product or services.
c. Name of all different products or services
d. None of all different Areas.
2. MEASUREMENT OF SEGMENT INFORMATION :-
a. Measurement :- We will not measure the required segment information seperately. But we will use same
measurement as done in “CODM” Report.
b. Required segment information :-
• Segment revenue
*EXPLANATION ON OTHER MATERIAL ITEMS
a) Interest income
External Internal b) Interest expenses
Sales Sales c) Net interest revenue (a-b)
• Segment results d) Depreciation and amortization expenses
• Segment assets e) Other non cash items like impairment loss etc.
• Segment liability f) Capital expenditure on asset during the year.
• Other material items
3. RECONCILATION :-
SEGMENT INFORMATION + ,- ENTITY INFORMATION
ADDJUSTMENTS
• As per the provision of IND AS 108, segment information should be
reconciled with entity information with regard to Results ,Assets , and
Liabilities.
A N Y
T I O N
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Q ?
THANK YOU
