AS 17- Segment Reporting in Nutshell

1. SEGMENT REPORTING
Accounting Standard 17

2. CONTENT
 Introduction
 Objectives
 Enterprises Covered
 Key Definitions
 Primary & Secondary Segments
 Reportable Segments
 Segment Accounting Policies

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

23. THANK YOU..!!
Presented by:-
Tushar Rathi