Ind AS 108, Operating Segments, Summary

Indian Accounting Standard (Ind AS) 108 Summary

Indian Accounting Standard (Ind AS) 108, Operating Segments applies to companies to which Ind AS apply as notified under the Companies Act, 2013. The core principle underlying this standard is that the entity shall disclose information to enable users of its financial statements to evaluate the nature and the financial effects of the business activities in which it engages and the economic environment in which it operates.

Segment disclosures are provided for those components of the entity that engage in business activities from which they may earn revenues and incur expenses, whose operating results are regularly reviewed by management in making operating decisions and for which discrete financial information is available.

Such components (operating segments) are identified on the basis of internal reports that the entity’s Chief Operating Decision Maker (CODM) regularly reviews in allocating resources to segments and in assessing their performance.

The aggregation of operating segments is permitted only when the operating segments have characteristics so similar that they can be expected to have essentially the same future prospects (i.e. meeting the specified aggregation criteria).

Reportable segments are identified based on quantitative thresholds of revenue, profit/loss, or assets.

The amounts disclosed for each reportable segment are the measures reported to the CODM, which are not necessarily based on the same accounting policies as the amounts recognised in the financial statements.

Because segment profit or loss, segment assets and segment liabilities are disclosed as they are reported to the CODM, rather than as they would be reported under Ind AS, disclosure of how these amounts are measured for each reportable segment is also required.

Reconciliations between total amounts for all reportable segments and financial statement amounts are disclosed with a description of all material reconciling items.

The entity would also be required to carry out a reconciliation between policies applied in computing information for management systems (MIS) and those used for segment reporting. Hence, the entity will need to devise or upgrade systems to ensure comparability between the MIS and the accounting system.

General and entity-wide disclosures include information about products and services, geographical areas – including country of domicile and individual foreign countries, if material – major customers, and factors used to identify the entity’s reportable segments. Such disclosures are required even if the entity has only one segment.

Comparative information is normally restated for changes in reportable segments.

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.

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