Indian Accounting Standard (Ind AS)108

OperatingSegments

(ThisIndianAccountingStandardincludesparagraphssetinboldtypeandplaintype, which have equal authority.Paragraphs in bold type indicate the main principles.)

Coreprinciple

1An entity shall disclose information to enable users of its financialstatementsto evaluate the nature and financial effects of the business activities inwhichit engages and the economic environments in which itoperates.

Scope

2This Accounting Standard shall apply to companies to which IndianAccounting Standards (Ind ASs) notified under the Companies Actapply.

[Refer Appendix1]

3If an entity that is not required to apply this Ind AS chooses todisclose informationaboutsegmentsthatdoesnotcomplywiththisIndAS,itshallnot describe the information as segmentinformation.

4If a financial report contains both the consolidated financial statements of aparent thatiswithinthescopeofthisIndASaswellastheparent’sseparatefinancial statements, segment information is required only in the consolidatedfinancial statements.

Operatingsegments

5An operating segment is a component of anentity:

(a)thatengagesinbusinessactivitiesfromwhichitmayearnrevenuesand incur expenses (including revenues and expenses relating totransactionswith other components of the sameentity),

(b)whose operating results are regularly reviewed by the entity’schiefoperating decision maker to make decisions about resources tobe allocated to the segment and assess its performance,and

(c)for which discrete financial information isavailable.

An operating segment may engage in business activities for which it has yetto earn revenues, for example, start-up operations may be operating segmentsbefore earningrevenues.

6Noteverypartofanentityisnecessarilyanoperatingsegmentorpartofan operating segment. For example, a corporate headquarters or somefunctional departments may not earn revenues or may earn revenues that are onlyincidental to the activities of the entity and would not be operating segments. Forthepurposes of this Ind AS, an entity’s post-employment benefit plans arenot operatingsegments.

7The term ‘chief operating decision maker’ identifies a function, not necessarilya managerwithaspecifictitle.Thatfunctionistoallocateresourcestoandassessthe performance of the operating segments of an entity. Often the chiefoperating decision maker of an entity is its chief executive officer or chief operatingofficer but, for example, it may be a group of executive directors orothers.

8For many entities, the three characteristics of operating segments describedinparagraph 5 clearly identify its operating segments. However, an entitymay produce reports in which its business activities are presented in a variety ofways.If the chief operating decision maker uses more than one set ofsegment information, other factors may identify a single set of components asconstituting anentity’soperatingsegments,includingthenatureofthebusinessactivitiesof each component, the existence of managers responsible for them, andinformation presented to the board ofdirectors.

9Generally, an operating segment has a segment manager who isdirectly accountable to and maintains regular contact with the chief operatingdecision makertodiscussoperatingactivities,financialresults,forecasts,orplansforthe segment.Theterm‘segmentmanager’identifiesafunction,notnecessarilya manager with a specific title. The chief operating decision maker also may bethe segment manager for some operating segments. A single manager may bethe segmentmanagerformorethanoneoperatingsegment.Ifthecharacteristicsin paragraph 5 apply to more than one set of components of an organisation butthere is only one set for which segment managers are held responsible, that setof components constitutes the operatingsegments.

10Thecharacteristicsinparagraph5mayapplytotwoormoreoverlappingsetsof components for which managers are held responsible. That structure issometimes referred to as a matrix form of organisation. For example, in some entities,some managers are responsible for different product and service linesworldwide,whereas other managers are responsible for specific geographical areas. Thechief operating decision maker regularly reviews the operating results of both setsof components, and financial information is available for both. In that situation,the entity shall determine which set of components constitutes the operatingsegments by reference to the coreprinciple.

Reportablesegments

11An entity shall report separately information about each operating segmentthat:

(a)has been identified in accordance with paragraphs 5–10 or resultsfrom aggregatingtwoormoreofthosesegmentsinaccordancewithparagraph 12,and

(b)exceeds the quantitative thresholds in paragraph13..

Paragraphs 14–19 specify other situations in which separate information aboutan operating segment shall bereported.

Aggregationcriteria

12Operating segments often exhibit similar long-term financial performance ifthey havesimilareconomiccharacteristics.Forexample,similarlong-termaverage gross margins for two operating segments would be expected if theireconomic characteristics were similar. Two or more operating segments may beaggregated into a single operating segment if aggregation is consistent with the coreprinciple of this Ind AS, the segments have similar economic characteristics, andthe segments are similar in each of the followingrespects:

(a)the nature of the products andservices;

(b)the nature of the productionprocesses;

(c)the type or class of customer for their products andservices;

(d)the methods used to distribute their products or provide their services;and

(e)if applicable, the nature of the regulatory environment, forexample,banking, insurance or publicutilities.

Quantitativethresholds

13An entity shall report separately information about an operating segmentthat meets any of the following quantitativethresholds:

(a)Its reported revenue, including both sales to external customersand intersegmentsalesortransfers,is10percentormoreofthecombined revenue, internal and external, of all operatingsegments.

(b)The absolute amount of its reported profit or loss is 10 per cent or moreof thegreater,inabsoluteamount,of(i)thecombinedreportedprofitofall operating segments that did not report a loss and (ii) thecombined reported loss of all operating segments that reported aloss.

(c)Itsassetsare10percentormoreofthecombinedassetsofalloperating segments.

Operating segments that do not meet any of the quantitative thresholds maybe considered reportable, and separately disclosed, if management believesthat informationaboutthesegmentwouldbeusefultousersofthefinancial statements.

14An entity may combine information about operating segments that do not meet the quantitative thresholds with information about other operating segmentsthat do not meet the quantitative thresholds to produce a reportable segment only ifthe operating segments have similar economic characteristics and share a majorityofthe aggregation criteria listed in paragraph12.

15If the total external revenue reported by operating segments constitutes lessthan75 per cent of the entity’s revenue, additional operating segments shallbe identified as reportable segments (even if they do not meet the criteriain paragraph13)untilatleast75percentoftheentity’srevenueisincludedin reportablesegments.

16Information about other business activities and operating segments that arenot reportableshallbecombinedanddisclosedinan‘allothersegments’category separately from other reconciling items in the reconciliations requiredby paragraph28.Thesourcesoftherevenueincludedinthe‘allothersegments’ category shall bedescribed.

17If management judges that an operating segment identified as areportable segment in the immediately preceding period is of continuingsignificance, informationaboutthatsegmentshallcontinuetobereportedseparatelyinthe current period even if it no longer meets the criteria for reportability inparagraph 13.

18If an operating segment is identified as a reportable segment in the currentperiod inaccordancewiththequantitativethresholds,segmentdataforapriorperiod presented for comparative purposes shall be restated to reflect the newly reportable segment as a separate segment, even if that segment did not satisfythe criteriaforreportabilityinparagraph13inthepriorperiod,unlessthenecessary information is not available and the cost to develop it would beexcessive.

19There may be a practical limit to the number of reportable segments that anentity separately discloses beyond which segment information may become toodetailed. Althoughnopreciselimithasbeendetermined,asthenumberofsegmentsthat are reportable in accordance with paragraphs 13–18 increases above ten, theentity should consider whether a practical limit has beenreached.

Disclosure

20An entity shall disclose information to enable users of its financialstatementsto evaluate the nature and financial effects of the business activities inwhichit engages and the economic environments in which itoperates.

21To give effect to the principle in paragraph 20, an entity shall disclosethe following for each period for which a statement of profit and loss ispresented:

(a)general information as described in paragraph22;

(b)information about reported segment profit or loss, includingspecified revenues and expenses included in reported segment profit or loss,segment assets, segment liabilities and the basis of measurement, as describedinparagraphs 23–27;and

(c)reconciliations of the totals of segment revenues, reported segment profitor loss, segment assets, segment liabilities and other material segment itemsto corresponding entity amounts as described in paragraph28.

Reconciliations of the amounts in the balance sheet for reportable segments tothe amounts in the entity’s balance sheet are required for each date at which abalance sheetispresented.Informationforpriorperiodsshallberestatedasdescribedinparagraphs 29 and30.

Generalinformation

22An entity shall disclose the following generalinformation:

(a)factors used to identify the entity’s reportable segments, including thebasisoforganisation(forexample,whethermanagementhaschosentoorganisethe entity around differences in products and services, geographicalareas,regulatory environments, or a combination of factors and whetheroperatingsegments have been aggregated);

(aa)the judgements made by management in applying the aggregation criteriain paragraph 12. This includes a brief description of theoperatingsegmentsthathavebeenaggregatedinthiswayandtheeconomic indicators that have been assessed in determining that theaggregated operating segments share similar economic characteristics;and

(b)types of products and services from which each reportable segmentderivesitsrevenues.

Information about profit or loss, assets andliabilities

23An entity shall report a measure of profit or loss for each reportable segment.Anentity shall report a measure of total assets and liabilities for eachreportable segmentifsuchamountsareregularlyprovidedtothechiefoperatingdecision maker. An entity shall also disclose the following about each reportablesegment ifthespecifiedamountsareincludedinthemeasureofsegmentprofitorlossreviewed by the chief operating decision maker, or are otherwiseregularly provided to the chief operating decision maker, even if not included inthat measure of segment profit orloss:

(a)revenues from externalcustomers;

(b)revenues from transactions with other operating segments of thesame entity;

(c)interestrevenue;

(d)interestexpense;

(e)depreciation andamortisation;

(f)material items of income and expense disclosed in accordancewith paragraph 97 of Ind AS 1,Presentation of FinancialStatements;

(g)theentity’sinterestintheprofitorlossofassociatesandjointventuresaccounted for by the equitymethod;

(h)income tax expense or income;and

(i)material non-cash items other than depreciation andamortisation.

Anentityshallreportinterestrevenueseparatelyfrominterestexpenseforeach reportable segment unless a majority of the segment’s revenues are frominterest and the chief operating decision maker relies primarily on net interest revenueto assess the performance of the segment and make decisions about resources tobe allocatedtothesegment.Inthatsituation,anentitymayreportthatsegment’sinterest revenue net of its interest expense and disclose that it has doneso.

24An entity shall disclose the following about each reportable segment ifthe specified amounts are included in the measure of segment assets reviewed bythe chiefoperatingdecisionmakerorareotherwiseregularlyprovidedtothechief operating decision maker, even if not included in the measure of segmentassets:

(a)the amount of investment in associates and joint ventures accounted forby the equity method,and

(b)the amounts of additions to non-current assets¹ other thanfinancial instruments, deferred tax assets, net defined benefit assets (see Ind AS19, Employee Benefits) and rights arising under insurancecontracts.

Measurement

25Theamountofeachsegmentitemreportedshallbethemeasurereportedtothe chief operating decision maker for the purposes of making decisionsabout allocatingresourcestothesegmentandassessingitsperformance.Adjustmentsand eliminations made in preparing an entity’s financial statementsand allocations of revenues, expenses, and gains or losses shall be includedin determining reported segment profit or loss only if they are included inthe measure of the segment’s profit or loss that is used by the chief operatingdecision maker. Similarly, only those assets and liabilities that are included in themeasuresof the segment’s assets and segment’s liabilities that are used by thechief operating decision maker shall be reported for that segment. If amountsare allocatedtoreportedsegmentprofitorloss,assetsorliabilities,thoseamountsshall be allocated on a reasonablebasis.

26Ifthechiefoperatingdecisionmakerusesonlyonemeasureofanoperatingsegment’s profit or loss, the segment’s assets or the segment’s liabilitiesin assessing segment performance and deciding how to allocate resources,segment profit or loss, assets and liabilities shall be reported at those measures. If thechief operating decision maker uses more than one measure of an operatingsegment’sprofit or loss, the segment’s assets or the segment’s liabilities, thereported measuresshallbethosethatmanagementbelievesaredeterminedinaccordance with the measurement principles most consistent with those used in measuringthecorresponding amounts in the entity’s financialstatements.

27Anentityshallprovideanexplanationofthemeasurementsofsegmentprofitor loss,segmentassetsandsegmentliabilitiesforeachreportablesegment.Ata minimum, an entity shall disclose thefollowing:

(a)the basis of accounting for any transactions between reportablesegments.

(b)thenatureofanydifferencesbetweenthemeasurementsofthereportable segments’ profits or losses and the entity’s profit or loss before incometax expenseorincomeanddiscontinuedoperations(ifnotapparentfromthe reconciliations described in paragraph 28). Those differences couldinclude accounting policies and policies for allocation ofcentrally incurredcoststhat are necessary for an understanding of the reported segmentinformation.

(c)thenatureofanydifferencesbetweenthemeasurementsofthereportable segments’ assets and the entity’s assets (if not apparent fromthe reconciliations described in paragraph 28). Those differences couldinclude accounting policies and policies for allocation of jointly used assets thatare necessary for an understanding of the reported segmentinformation.

(d)thenatureofanydifferencesbetweenthemeasurementsofthereportable segments’ liabilities and the entity’s liabilities (if not apparent fromthe reconciliations described in paragraph 28). Those differences couldinclude accountingpoliciesandpoliciesforallocationofjointlyutilisedliabilitiesthat are necessary for an understanding of the reported segmentinformation.

(e)thenatureofanychangesfrompriorperiodsinthemeasurementmethodsusedtodeterminereportedsegmentprofitorlossandtheeffect,ifany,of those changes on the measure of segment profit orloss.

(f)the nature and effect of any asymmetrical allocations to reportablesegments.For example, an entity might allocate depreciation expense to asegment without allocating the related depreciable assets to thatsegment.

Reconciliations

28An entity shall provide reconciliations of all of thefollowing:

(a)the total of the reportable segments’ revenues to the entity’srevenue.

(b)thetotalofthereportablesegments’measuresofprofitorlosstothe entity’s profit or loss before tax expense (tax income) anddiscontinued operations.However,ifanentityallocatestoreportablesegmentsitemssuch as tax expense (tax income), the entity may reconcile the total ofthe segments’measuresofprofitorlosstotheentity’sprofitorlossafterthoseitems.

(c)thetotalofthereportablesegments’assetstotheentity’sassetsifthesegment assets are reported in accordance with paragraph23.

(d)thetotalofthereportablesegments’liabilitiestotheentity’sliabilitiesif segment liabilities are reported in accordance with paragraph23.

(e)the total of the reportable segments’ amounts for every other materialitem of information disclosed to the corresponding amount for theentity. Allmaterialreconcilingitemsshallbeseparatelyidentifiedanddescribed.Forexample,theamountofeachmaterialadjustmentneededtoreconcilereportablesegment profit or loss to the entity’s profit or loss arising fromdifferent accounting policies shall be separately identified anddescribed.

Restatement of previously reportedinformation

29Ifanentitychangesthestructureofitsinternalorganisationinamannerthat causesthecompositionofitsreportablesegmentstochange,thecorresponding information for earlier periods, including interim periods, shall be restatedunlessthe 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 ofdisclosure. Following a change in the composition of its reportable segments, an entityshall disclosewhetherithasrestatedthecorrespondingitemsofsegmentinformation for earlierperiods.

30If an entity has changed the structure of its internal organisation in a mannerthat causes the composition of its reportable segments to change and ifsegment information for earlier periods, including interim periods, is not restated toreflect the change, the entity shall disclose in the year in which the changeoccurssegment information for the current period on both the old basis and the newbasisof segmentation, unless the necessary information is not available and the costto develop it would beexcessive.

Entity-widedisclosures

31Paragraphs32–34applytoallentitiessubjecttothisIndASincludingthose entities that have a single reportable segment. Some entities’ businessactivities arenotorganisedonthebasisofdifferencesinrelatedproductsandservicesor differences in geographical areas of operations. Such an entity’sreportable segments may report revenues from a broad range of essentially differentproductsand services, or more than one of its reportable segments may provideessentially thesameproductsandservices.Similarly,anentity’sreportablesegmentsmay hold assets in different geographical areas and report revenues from customersin different geographical areas, or more than one of its reportable segmentsmay operate in the same geographical area. Information required by paragraphs32–34 shallbeprovidedonlyifitisnotprovidedaspartofthereportablesegment information required by this IndAS.

Information about products andservices

32 An entity shall report the revenues from external customers for each productand service, or each group of similar products and services, unless thenecessary informationisnotavailableandthecosttodevelopitwouldbeexcessive,inwhich case that fact shall be disclosed. The amounts of revenues reported shallbe based on the financial information used to produce the entity’sfinancial statements.

Information about geographicalareas

33An entity shall report the following geographical information, unlessthe necessary information is not available and the cost to develop it wouldbe excessive:.

(a)revenuesfromexternalcustomers(i)attributedtotheentity’scountryof domicile and (ii) attributed to all foreign countries in total from whichthe entity derives revenues. If revenues from external customers attributedto an individual foreign country are material, those revenues shallbe disclosed separately. An entity shall disclose the basis for attributing revenues from external customers to individualcountries.

(b)non-current assets²other than financial instruments, deferred taxassets,post-employment benefit assets, and rights arising underinsurance contracts (i) located in the entity’s country of domicile and (ii) locatedin all foreign countries in total in which the entity holds assets. If assets inan individual foreign country are material, those assets shall bedisclosed separately.

Theamountsreportedshallbebasedonthefinancialinformationthatisusedto produce the entity’s financial statements. If the necessary information isnot available and the cost to develop it would be excessive, that fact shall bedisclosed. Anentitymayprovide,inadditiontotheinformationrequiredbythisparagraph, subtotals of geographical information about groups ofcountries.

Information about majorcustomers

34Anentityshallprovideinformationabouttheextentofitsrelianceonitsmajor customers. If revenues from transactions with a single external customeramount to10percentormoreofanentity’srevenues,theentityshalldisclosethatfact, thetotalamountofrevenuesfromeachsuchcustomer,andtheidentityofthe segmentorsegmentsreportingtherevenues.Theentityneednotdisclosethe identity of a major customer or the amount of revenues that each segmentreports from that customer. For the purposes of this Ind AS, a group of entities known to a reporting entity to be under common control shall be considered asingle customer. However, judgement is required to assess whether agovernment(including government agencies and similar bodies whether local, nationalorinternational) and entities known to the reporting entity to be under the control of that government are considered a single customer. In assessing this, thereporting entity shall consider the extent of economic integration between thoseentities.

AppendixA

Definedterm

This Appendix is an integral part of the IndAS.

operatingsegment

An operating segment is a component of anentity: (a) that engages in business activities from which itmay earn revenues and incur expenses (includingrevenuesand expenses relating to transactions withother components of the sameentity), (b)whose operating results are regularly reviewed bythe entity’s chief operating decision maker tomake decisions about resources to be allocated tothe segment and assess its performance,and (c) for which discrete financial information isavailable.

Appendix1

Note:ThisAppendixisnotapartoftheIndianAccountingStandard.Thepurposeofthis Appendix is only to bring out the major differences, if any, between Indian AccountingStandard (Ind AS) 108 and the corresponding International Financial Reporting Standard (IFRS)8, Operating Segments, issued by the International Accounting StandardsBoard.

Comparison with IFRS 8, OperatingSegments

1.ThetransitionalprovisionsgiveninIFRS108hasnotbeengiveninIndAS108, since all transitional provisions related to Ind ASs, wherever considered appropriate, have been included in Ind AS 101, First-time Adoption ofIndian Accounting Standards, corresponding to IFRS 1, First-time Adoptionof International Financial ReportingStandards.

2.Different terminology is used, as used in existing laws eg, the term ‘balancesheet’ isusedinsteadof‘Statementoffinancialposition’and‘Statementofprofitand loss’ is used instead of ‘Statement of comprehensiveincome’.

3.Paragraph 2 of IFRS 8 requires that thestandard shall apply to:

(a) the separate or individual financial statements of anentity:

(i)whosedebtorequityinstrumentsaretradedinapublicmarket(a domestic or foreign stock exchange oranover-the-counter market, including local and regional markets),or

(ii)that files, or is in the process of filing, its financial statementswith asecuritiescommissionorotherregulatoryorganisationforthe purposeofissuinganyclassofinstrumentsinapublicmarket; and

(b)the consolidated financial statements of a group with aparent:

(i)whosedebtorequityinstrumentsaretradedinapublicmarket(a domestic or foreign stock exchange oranover-the-counter market, including local and regional markets),or

(ii)thatfiles,orisintheprocessoffiling,theconsolidatedfinancial statements with a securities commission or otherregulatory organisation for the purpose of issuing any class of instruments in a publicmarket.

TheabovehavebeendeletedintheIndASastheapplicabilityorexemptionsto the Indian Accounting Standards is governed by the Companies Act and theRules madethereunder.However,theparagraphnumberhasbeenretainedinIndAS108 to maintain consistency with paragraph numbers ofIFRS8.