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Operating Segments

Ind AS - 108 - Rule - B. Indian Accounting Standards (Ind AS) - Companies Law - Ind AS - 108 - Indian Accounting Standard (Ind AS) 108 (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 th .....

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nt 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. 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 operat .....

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s may not earn revenues or may earn revenues that are only incidental to the activities of the entity and would not be . For the purposes of this Ind AS, an entity s post-employment benefit plans are not . 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 of an entity. Often the chief operating decision maker of an entity is its chief executive officer or ch .....

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ess 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 de .....

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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 by reference to th .....

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g-term financial performance if they have similar economic characteristics. For example, similar long-term average gross margins for two would be expected if their economic characteristics were similar. Two or more 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 characteristics, and the segments are similar in each of the following respects: (a) the nature of the products and services; (b) t .....

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ales to external customers and intersegment sales or transfers, is 10 per cent or more of the combined revenue, internal and external, of all . (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 that did not report a loss and (ii) the combined reported loss of all that reported a loss. (c) Its assets are 10 per cent or more of the combined assets of all . that do not meet any of the quantita .....

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15 If the total external revenue reported by constitutes less than 75 per cent of the entity s revenue, additional 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 that are not reportable shall be combined and disclosed in an all other segments category separately from other reconciling items in the reconcilia .....

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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 .....

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s 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 paragr .....

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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 have been aggregated) ; (aa) the judgements made by management in applying the aggregation criteria in paragraph .....

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iabilities 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) r .....

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tity 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 d .....

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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 i .....

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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 liabil .....

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etween 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 .....

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he 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 allocatio .....

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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) .....

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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 cha .....

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nt 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 op .....

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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. 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 .....

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mers 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 a .....

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. 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 .....

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ty shall consider the extent of economic integration between those entities. _____________________ 1For 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. 2For 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. Appendix A Defined te .....

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e, and (c) for which discrete financial information is available. 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, , issued by the International Accounting Standards Board. Comparison with IFRS 8, 1. The transitional provisions given in IFRS 108 has not been given .....

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