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    Accounting standard 17 Accounting standard 17 Presentation Transcript

    • ACCOUNTING STANDARD 17 (Segment Reporting)
    • Contents
      • Introduction
      • Objectives
      • Enterprises Covered
      • Key Definitions
      • Primary & Secondary Segments
      • Reportable Segments
      • Segment Accounting Policies
      • Disclosures
      • Case Study
    • Introduction
      • Also known as Segment Reporting.
      • Issued by the Council of the Institute of Chartered Accountants of India.
      • Commencing on or after 1.4.2001.
    • Objectives
        • To inform about the different types of products and services of an enterprise and the different geographical areas in which it operates.
        • To better understand the performance of the enterprise
        • To better assess the risks and returns of the enterprise,
        • To throw more light on merger and acquisition activity.
    • Enterprises Covered
      • Enterprises whose equity or debt securities are listed on the stock exchange.
      • Enterprises which are in the process of listing their equity or debt securities.
      • Financial institutions.
      • Banks.
    • Enterprises Covered
      • Insurance businesses.
      • All enterprises whose turnover exceeds Rs. 50 crore.
      • All enterprises having borrowings including public deposits, in excess of Rs. 10 crore.
      • Holding and subsidiary enterprises of any one of the above.
    • New Enterprises Covered
      • As per R.B.I Guidelines, the following sectors should also disclose their Segment Report:
      • Retail Banking
      • Corporate Banking
    • Key Definitions
      • Business Segment
        • Distinguishable component providing a product or service.
        • Subject to risks and returns different from other segments.
      • Business Segments can be identified on the basis of
        • Nature of products/services,
        • Nature of processes,
        • Nature of customers,
        • Distribution processes,
        • If applicable, the nature of the regulatory environment.
    •  
    • Key Definitions
      • Geographical segment:
        • Distinguishable component providing product/service in a particular economic environment.
        • Subject to risks and returns different from other segments.
        • This segment can be further divided based on -
          • Location of production facilities.
          • Location of consumers.
    •  
    • Key Definitions
      • Reportable segment :
      • Identification of Business segment or Geographical segment
    • Key Definitions
      • Enterprise revenue :
      • Revenue from sales to external customers.
    • Key Definitions
      • Segment revenue :
      • Revenue from transactions with other segments of the enterprise.
    •  
    • Key Definitions
      • Segment result
      • Difference between segment revenue and segment expenses.
    •  
    • Key Definitions
      • Segment assets
        • Employed by a segment in its operating activities
    •  
    • Key Definitions
      • Segment liabilities
        • Result from the operating activities of a segment
    •  
    • Identifying Reportable Segments
      • Primary & Secondary Segment Reporting Formats
      • Differentiation on the basis of Differences in risks & returns
      • For Example:-
          • If risks n returns of Big Bazaar are affected predominantly by the change in differences of products & services, then its primary format would be Business segment. Similarly if risks & returns of Big Bazaar are affected by the fact that it operates in different countries or other geographical areas, its primary format should be geographical segments.
    • Identifying Reportable Segments
      • Matrix Approach
      • If risks and returns of an enterprise are strongly affected both by differences in the products and
      • services it produces and by differences in the geographical areas in which it operates.
    • Reportable Segments
      • A business segment or geographical segment should be identified as a reportable segment if:
        • its revenue from sales to external customers and from transactions with other segments is 10 per cent or more of the total revenue, external and internal, of all segments; or
        • its segment result, whether profit or loss, is 10 per cent 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; or
        • its segment assets are 10 per cent or more of the total assets of all segments
    • Segment Accounting Policies
      • Segment accounting policies
      • This policies help in identifying -
        • Segments,
        • Method of pricing inter-segment transfers,
        • Basis for allocating revenues and expenses to segments.
    • Disclosure
      • An enterprise should disclose the following for each reportable segment:
      • segment revenue, classified into segment revenue from
          • Sales to external customers;
          • Transactions with other segments;
        • segment result;
        • total amount of segment assets;
        • total amount of segment liabilities;
        • total cost incurred to acquire segment assets;
        • total amount of depreciation on segment assets;
        • total amount of other significant non-cash expenses.
    • Disclosure
      • Secondary Segment Information
        • If primary format for reporting is a business segment , it should report the following information :
          • segment revenue from external customers classified on the basis of their location.
          • the total amount of segment assets based on the geographical location of assets.
          • the total cost incurred to acquire segment assets for each geographical segment.
    • Disclosure
      • If primary format for reporting is geographical segments, it should report the following information :
        • Revenue from sales to external customers for each customer-based geographical segment.
        • Changes In Accounting Policies Adopted For Segment Reporting.
        • The Types Of Products And Services Included In Each Reported Business Segment.
        • The Composition Of Each Reported Geographical Segment.
    • Case Study
      • Segment Reporting: Objective versus Reality
      Source: Business Line’s Survey of BL-250 companies.
      • Thank You