3. INTRODUCTION TO AS
Formulated by AS Board of ICAI
AS and Ind AS
Rules to be Observed
Objective
To Remove Variations in the Treatment of
several Accounting Aspects
To Bring about Standardization in Presentation
Add Reliability to the Financial Statements
4. INTRODUCTION
Also known as Segment Accounting
Issued by Institute of Chartered Accountants
of India
Commencing on or after 1.4.2001
5. OBJECTIVE
To Inform about the different types of
Products and Services and the different
Geographical Areas
To Better understand the Performance
To Better Assess the Risk and Returns
To Throw more light on Mergers and
Acquisition
6. ENTERPRISES COVERED
Enterprises which are listed on Stock Exchange
Enterprises which are in Process of Listing on
Stock Exchange
Financial Institution
Banks
Insurance Business
Enterprises whose Turnover exceeds 50 crore
Enterprises whose Borrowing exceeds 10 crore
Holding and Subsidiary Company of above
Enterprises
As per RBI Guidelines, Retail and Corporate banks also require to disclose their segment rep
7. DEFINITIONS
A Business Segment
A Distinguishable Component that is engaged in
providing an Individual Product or Service
Subject to Risk and Returns different from other
Segments
It can be Identify on the basis of:-
Nature of Product
Nature of Processes
Nature of Customer
Distribution Processes
nature of the Regulatory Environment
8. A Geographical Segment
A Distinguishable Component providing Products
or Services within a particular Economic
Environment
Subject to Risks and Returns different from other
Economic Environments
This segment further divided based on
Location of Production Facility
Location of Customer
9. Reportable Segment
Identification of Business Segment or
Geographical Segment
Enterprise Revenue
Revenue from Sales to External Customer
10. Segment Revenue is the aggregate of
The Portion of Enterprise Revenue that is directly
attributable to a Segment,
The Relevant Portion of Enterprise Revenue that
can be allocated on a Reasonable basis to a
Segment
Revenue from Transactions with other Segments
11. Segment Expense is the Aggregate of
The Expense resulting from the Operating Activities
of a segment that is directly attributable to the
Segment
The Relevant Portion of Enterprise Expense that can
be allocated on a Reasonable basis
Expense Relating to Transactions with other
Segments
It does not include:-
Extraordinary items as defined in AS 5
Interest Expense
Losses on Sales of Investments
Income Tax Expense
12. Segment Result
Difference between Segment Revenue and Segment
Expenses
13. Segment Assets
Operating Assets that are employed by a
Segment in its Operating Activities
Assets directly attributable to the segment or can
be allocated to the Segment on a Reasonable
basis
Segment Assets do not include Income Tax Assets
14. Segment Liabilities
Operating Liabilities that result from the
Operating Activities of a Segment
Liabilities directly attributable to the segment or
can be allocated to the Segment on a
Reasonable basis
Segment Liabilities do not include Income Tax Liabilities
15. Segment Accounting Policies
The Accounting Policies adopted for Preparation
and Presentation of the Financial Statements
This policies help in indentifying
Segments
Method of pricing inter-segment transfers
Basis for allocating Revenues and Expenses to
Segments
16. IDENTIFYING REPORTABLE SEGMENTS
Primary and Secondary Segment Reporting
Formats
The Dominant Source and Nature of Risks and
Returns will determine Primary Format for
Reporting Segment
Example:-
If Risk and Return is dominantly affected by change in
difference in product it produces then its Primary
Format would be Business segment and Vice Versa
17. Matrix Approach
If Risk and Return is dominantly affected by both
change in difference in product it produces and
Geographical Location in which it Operates
18. REPORTABLE SEGMENT
The Segment is Reportable if:-
Its Revenue from Sales to external customers and
from transactions with other segments is 10% or
more of the total revenue
Its segment result, whether profit or loss, is 10% or
more of
the combined result of all segments in profit, or
the combined result of all segments in loss
whichever is greater in absolute amount
Its segment assets are 10% or more of the total
assets of all segments.
19. DISCLOSURE
An Enterprise should Disclose the following for
each Reportable Segment
Segment Revenue classified into Revenue from
Sales to external customers
Transactions with other segments
Segment result
Total carrying amount of segment assets
Total amount of segment liabilities
Cost incurred to acquire segment assets
Expense included in the segment result for
depreciation and amortization
Total amount of significant non-cash expenses
20. Secondary Segment Information
If primary format for an enterprise is Business
Segments, It should report following
information:-
Segment revenue from external customer classified
on the basis of their Location
The total amount of Segment Assets based on
Geographical Location of Asset
The total cost incurred to acquire Segment Asset for
each Geographical segment
21. If primary format for an enterprise is
Geographical Segments, It should report
following information:-
Segment Revenue from external customer
The Total carrying amount of Segment Assets
The Total cost incurred during the period to acquire
segment assets
22. Inter-segment transfers should be measured on
actually price those transfers
Changes in Accounting Policies adopted for
segment reporting
The Type of Products and Services included in
each reported Business Segment
The Composition of each Reported Geographical
Segment