5. 10 crores during a a given accounting period, holding and subsidiary entreprises of any of the above during a given accounting period, fraction of entreprise revenue directly attributable to a segment, portion of entreprise revenue that can be allocated on a reasonable basis to a segment, revenue from transactions with other segments of the enterprise, expense resulting from the operating activities of a segment directly attributable to the segment, portion of entreprise expense that can be allocated on a reasonable basis to the segment including expense related to transactions with other segments of the entreprise, operating assets employed by a segment in its operating activities and, are either directly attributable to a segment or can be allocated to a segment on a reasonable basis, operating liabilities employed by a segment in its operating activities of a segment and, The primary format for reporting segment information should be business segments if the risks and returns of an entreprise are majorly impacted by variations in the products and services it produces, The primary format for reporting segment information should be geographical segments if the risks and returns of an entreprise are majorly impacted by the geographical areas in which it operates. Organisational and management structure of an enterprise and its internal financial reporting system normally provide the best evidence of the predominant source of risks and returns of the enterprise for the purpose of its segment reporting. Paragraphs 39-46 specify the disclosures required for reportable segments for primary segment reporting format of an enterprise. 29. Enterprises are encouraged to make all of the primary-segment disclosures identified in paragraphs 39-46 for each reportable secondary segment although paragraphs 47-51 require. Its predominant source of risks and returns becomes its primary segments reporting format. There can be two possibilities: The entreprise can consider business segments as its primary segment reporting format and geographic segments as its secondary format. revenue from sales to external customers and from transactions with other segments is 10% or more of the total revenue of all segments. Accounting Standard 5, ‘Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies’ requires that “when items of income and expense within profit or loss from ordinary activities are of such size, nature or incidence that their disclosure is relevant to explain the performance of the enterprise for the period, the nature and amount of such items should be disclosed separately”. 33. A business segment or geographical segment is identified as a reportable segment if: Segment information must be prepared as per the accounting policies adopted for preparing and presenting the entreprise’s financial statements. Provided that revenue from sales to external customers is 10% or more of entreprise revenue. AS-17: Segment Reporting: Applicability of Accounting Standard: Applicable to Level I Enterprises. Paragraph 53—59 address several others segment disclosure matters. 49. Prohibited Content 3. Examples of such items include write-downs of inventories, provisions for restructuring, disposals of fixed assets and long- term investments, legislative changes having retrospective application, litigation settlements, and reversal of provisions. Provided segment assets for each geographical segment are 10% or more of total assets of all geographical assets, total cost incurred during the period to acquire segment assets expected to be used during more than one period, total carrying amount of segment assets by geographical location of assets, total cost incurred during the period to acquire segment assets expected to be used for more than one period by location of the assets. Examples include changes in identification of segments and changes in the basis for allocating revenues and expenses to segments. Accordingly, an enterprise looks to this structure to determine whether its geographical segments should be based on the location of its assets or on the location of its customers. In that case, the directors and management of the enterprise should determine its business segments and geographical segments for external reporting purposes based on the factors in the definitions in paragraph 5 of this Statement, rather than on the basis of its system of internal financial reporting to the board of directors and chief executive officer, consistent with the following: (a) If one or more of the segments reported internally to the directors and management is a business segment or a geographical segment based on the factors in the definitions in paragraph 5 but others are not, sub-paragraph (b) below should be applied only to those internal segments that do not meet the definitions in paragraph 5 (that is, an internally reported segments that meets the definition should not be further segmented); (b) For those segments reported internally to the directors and management that do not satisfy the definitions in paragraph 5, management of the enterprise should look to the next lower level of internal segmentation that reports information along product and service lines or geographical lines, as appropriate under the definitions in paragraph 5; and. The factors in paragraph 5 for identifying business segments and geographical segments are not listed in any particular order. Assets and liabilities that relate jointly to two or more segments should be allocated to segments if, and only if, their related revenues and expenses also are allocated to those segments. Accounting standard 17 deals with segment reporting that was established to help better understand performance risk and returns of an enterprise. Segment reporting is required for publicly-held entities, and is not required for privately held ones. (ii) All other commercial, industrial and business reporting enterprises, whose turnover for the accounting period exceeds Rs 50 crores. accounting standard - 17 segment reporting j.p., kapur & uberai Slideshare uses cookies to improve functionality and performance, and to provide you with relevant advertising. AS 17 – Segment Reporting. Therefore, the organisational structure of an enterprise and its internal financial reporting system are normally the basis for identifying its segments. The Board could: Add individual pieces of segment information to the list of requirement disclosures. This Standard comes into effect in respect of accounting periods commencing on or after 1.4.2001 and is mandatory in nature, from that date, in respect of the following. Segment liabilities do not include borrowings and other liabilities that are incurred for financing rather than operating purposes. 59. Conversely, an enterprise may choose not to allocate some item of revenue, expense, asset or liability for internal financial reporting purposes, even though a reasonable basis for doing so exists. 17. 48. Many enterprises provide groups of products and services or operate in geographical areas that are subject to differing rates of profitability, opportunities for growth, future prospects, and risks. If you continue browsing the site, you agree to the use of cookies on this website. It states that, the enterprise should prepare its segment report on the basis of operating segments which have determined by its key decision makers (i.e. There is another case where the primary format of segment reporting is geographical segments based on location of customers. INDAS 108 3. Such information helps users of financial statements: To assess the impact of such matters as shifts in demand, changes in the prices of inputs or other factors of production, and the development of alternative products and processes on a business segment, it is necessary to know the activities encompassed by that segment. Try QuickBooks Invoicing & Accounting Software – 30 Days Free Trial. This Statement does not require, but does not prohibit, a ‘matrix presentation’. 2. Such costs are part of segment expense if they relate to the operating activities of the segment and if they can be directly attributed or allocated to the segment on a reasonable basis. Such an item is allocated pursuant to the definitions of segment revenue, segment expense, segment assets, and segment liabilities in this Statement. Appendix III to this Statement presents an illustration of the disclosures for primary and secondary formats that are required by this Statement. However, costs are sometimes incurred at the enterprise level on behalf of a segment. (ii) The combined result of all segments in loss, whichever is greater in absolute amount; or (c) its segment assets are 10 percent or more of the total assets of all segments. the managerial approach). If that measure is prepared on a basis other than the accounting policies adopted for the financial statements of the enterprise, the enterprise will include in its financial statements a clear description of the basis of measurement. As per AS 17, Segment Reporting is useful for better understanding of the financial statements and taking decisions by the users. List of Level I Enterprises: 1. Segment assets are those operating assets that are employed by a segment in its operating activities and that either are directly attributable to the segment or can be allocated to the segment on a reasonable basis. AS 5 requires that changes in accounting policies adopted by the enterprise should be made only if required by statute, or for compliance with an accounting standard, or if it is considered that the change would result in a more appropriate presentation of events or transactions in the financial statements of the enterprise. Segment assets include operating assets shared by two or more segments if a reasonable basis for allocation exists. Factors that should be considered in identifying geographical segments include: (a) Similarity of economic and political conditions; (b) Relationships between operations in different geographical areas. In some cases, however, a revenue, expense, asset or liability may have been allocated to segments for internal financial reporting purposes on a basis that is understood by enterprise management but that could be deemed arbitrary in the perception of external users of financial statements. 7. 41. Enterprises are encouraged to make all of the primary segment disclosures identified in Paragraph 39—46 for each reportable secondary segment although Paragraph 47—51 requires considerably less disclosure on Secondary basis. 24. Business and geographical segments of an enterprise for external reporting purposes should be those organisational units for which information is reported to the board of directors and to the chief executive officer for the purpose of evaluating the unit’s performance and for making decisions about future allocations or resources, except as provided in paragraph. Terms and conditions, features, support, pricing, and service options subject to change without notice. Disclosure of segment cash flow is, therefore, encouraged, though not required. This guidance also includes segment considerations for domestic filers and foreign private issuers that apply IFRS or other GAAP. The objective of this statement is to establish principles for reporting financial information, about different types of products and services an enterprise produces and the different geographical areas in which it operates. The objective of this Statement is to establish principles for reporting financial information, about the different types of products and services an enterprise produces and the different geographical areas in which it operates. Further, it is subject to risk and returns that are different from units operating in other economic environments. If primary format of an enterprise for reporting segments information is business segments, it should also report the following information: (a) Segment revenue from external customers by geographical area based on the geographical location of its customers, for each geographical segments whose revenue from sales to external customers is 10 per cent or more of enterprise revenue; (b) The total carrying amount of segments assets by geographical location of assets, for each geographical segment whose segments assets are 10 per cent or more of the total assets of all geographical segments; and. (c) Corporate /Wholesale Banking Wholesale Banking includes all advances to trusts, partnership firms, companies and … Here turnover does not include other income, entreprises having borrowings including public deposits exceeding Rs. 01 July 2010 Accounting Standard (AS) 17, ‘Segment Reporting’, issued by the Council of the Institute of Chartered Accountants of India, comes into effect in respect of … Disclaimer 9. AS 3, Cash Flow Statements recommends that an enterprise present a cash flow statement that separately reports cash flows from operating, investing and financing activities. A geographical segment may be a single country, a group of two or more countries, or a region within a country. What is Reportable Segment? 44. AS 17 deals with the collective principles that oversee the reporting financial information on diverse types of products. The definitions of segment revenue, segment expense, segment assets and segment liabilities include amounts of such items that are directly attributable to a segment and amounts of such items that can be allocated to a segment on a reasonable basis. 58. Segment liabilities do not include income tax liabilities. Objective : The objective of this Standard is to establish principles for reporting financial information, about the different types of products and services an enterprise produces and the different geographical areas in which it operates. Appendix II to this Statement presents an illustration of the determination of reportable segments as per paragraphs 27-29.34. Ltd. All rights reserved. And the assets of the entreprise are located in different geographical areas from its customers. A segment identified as a reportable segment in the immediately preceding period because it satisfied the relevant 10 per cent thresholds should continue to be a reportable segment for the current period notwithstanding that its revenue, result, and assets all no longer meet the 10 per cent thresholds. Segment assets include goodwill that is directly attributable to a segment or that can be allocated to a segment on a reasonable basis, and segment expense includes related amortisation of goodwill. Segment Disclosure Requirements For segment disclosure requirements, three alternatives were considered. Similarly, a single geographical segment does not include operations in economic environments with significantly differing risks and returns. 13. ACCOUNTING STANDARD 17 (Segment Reporting) Slideshare uses cookies to improve functionality and performance, and to provide you with relevant advertising. In order to determine whether entreprise will consider business segments or geographical segments as the primary segment reporting format, the dominant source and nature of risks and returns of an entreprise are considered. Accounting Standard (AS) 17: Segment Reporting: Accounting Standard (AS) 18: Related Party Disclosures: Accounting Standard (AS) 19: Leases: Accounting Standard (AS) 20 : Earnings Per Share: Accounting Standard (AS) 21 : Consolidated Financial Statements: Accounting Standard (AS) 22 : Accounting for Taxes on Income: Accounting Standard (AS) 23 If primary format of an enterprise for reporting segments information is geographical segments that are based on location of customers, and if the assets of the enterprise are located in different geographical areas from its customers, then the enterprise should also report the following segment information for each asset- based geographical segment whose revenue from sales to external customers or segment assets are 10 per cent or more of total enterprise amounts: (a) The total carrying amount of segment assets by geographical location of the assets; and. Enterprise revenue is revenue from sales to external customers as reported in the statement of profit and loss. An enterprise should disclose the following for each reportable segment: (a) Segment revenue, classified into segment revenue from sales to external customers and segment revenue from transactions with other segments; (c) Total carrying amount of segment assets; (e) Total cost incurred during the period to acquire segment assets that are expected to be used during more than one period (tangible and intangible fixed assets); (f) Total amount of expense included in the segment result for depreciation and amortisation in respect of segment assets for the period; and. For a clearer understanding of the performances of segments. 8. If that segment is not designated as a reportable segment, it should be included as an unallocated reconciling item. Reportable Segment is a Business Segment or Geographical Segment for which segment information is required to be disclosed. In some cases, organisation and internal reporting of an enterprise may have developed along lines unrelated to both the types of products and services it produces, and the geographical areas in which it operates. Paragraph 40 (b) requires an enterprise to report segment result. If segment assets have been revalued subsequent to acquisition, then the measurement of segment assets reflects those revaluations. For example, an asset is included in segment assets if, and only if, the related depreciation or amortisation is included in segment expense. 28. If you continue browsing the site, you agree to the use of cookies on this website. A single business segments does not include products and services with significantly differing risks and returns. Each financial situation is different, the advice provided is intended to be general. Determining the composition of a business or geographical segment involves a certain amount of judgment. AS 17 Segment Reporting. Note: It is clarified that individual housing loans will also form part of Retail Banking segment for the purpose of reporting under AS-17. Paragraphs 47-51 identify the disclosures required for secondary reporting format of an enterprise. Information may be abridged and therefore incomplete. 11. To identify the predominant source and risk and return of an entreprise, internal organization and management structure of an entreprise, as well as the system of the internal financial reporting to the top management, is generally considered. Segment information should be prepared in conformity with the accounting policies adopted for preparing and presenting the financial statements of the enterprise as a whole. The entreprise can choose business segments or geographic segments as its as primary segment reporting format with the other as its secondary reporting format using its judgement. Where the effect of such change is not ascertainable, wholly or in part, the fact should be indicated. Withdrawal of IAS 14 This IFRS supersedes The disclosure, however, does change the level at which the significance of such items is evaluated for disclosure purposes from the enterprise level to the segment level. 42. As- 17 Segment Reporting The standard prescribe the procedure and manner of reporting of financial performance of various products and service and geographical performance instead of a company as a whole for better understanding of the financial statement. 23. 1. The standard is applied in presenting general purpose financial statements. The disclosure requirements in Paragraph 40—46 should be applicable to each reportable-segments based on primary reporting format of an enterprise. Content Guidelines 2. Changes in accounting policies adopted at the enterprise level that affect segment information are dealt with in accordance with AS 5. At the same time, the definitions of segment revenue, segment expense, segment assets, and segment liabilities are interrelated, and the resulting allocation should be consistent. If an enterprise can compute segment net profit or loss or some other measure of segment profitability other than segment result, without arbitrary allocations, reporting of such amount(s) in addition to segment result is encouraged. The 10 per cent thresholds in this Statement arc not intended to be a guide for determining materiality for any aspect of financial reporting other than identifying reportable business and geographical segments. 10. If a change is made in the accounting policies which has no material effect on the financial statements for the current period but which is reasonably expected to have a material effect in later periods, the fact of such change should be appropriately disclosed in the period in which the change is adopted. 57. It is revenue from sales made to external customers as reported in profit and loss statement. While the accounting policies used in preparing and presenting the financial statements of the enterprise as a whole are also the fundamental segment accounting policies, segment accounting policies include, in addition, policies that relate specifically to segment reporting, such as identification of segments, methods of pricing inter-segment transfers, and basis for allocating revenues and expenses to segments. shows that segment-reporting practices of these units have taken a new turn after the implementation of AS-17. 38. In the context of reporting of segment information in consolidated financial statements, the references in this Statement to any financial statement items should construed to be the relevant item as appearing in the consolidated financial statements. 2. Not applicable to Level II and Level III enterprises in their entirely. Primary and Secondary Segment Reporting Formats:. 39. AS-17 – Segment Reporting : The objective of this standard is to establish principles for reporting financial information, about the different types of products and services an enterprise produces and the different geographical areas in which it operates. 25. An enterprise looks to its internal financial reporting system as the starting point for identified those items that can be directly attributed, or reasonably allocated, to segments. 15. Paragraphs 39-46 identify the disclosure requirements to be applied to each reportable segment based on primary reporting format of an enterprise. Latest edition: KPMG’s updated guidance on and interpretation of ASC 280, Segment Reporting – with analysis, Q&As and examples. 47. Segment Liabilities. A business segment or a geographical segment which is not a reportable segment as per paragraph 27, may be designated as a reportable segment despite its size at the discretion of the management of the enterprise. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. 3. In addition to this, the entreprise should also present reconciliation between information disclosed for reportable segments and aggregated information in the entreprise financial statements. Let us make an in-depth study of segment reporting as per Accounting Standard (AS) 17. Country, a ‘ matrix presentation ’ practices of these disclosure standard ) the of., pricing, and the students jointly relate to two or more of entreprise revenue allowances. With as 5 a substitute for, legal or financial advice individual pieces of segment information but... Predominant sources of risks affect how most enterprises are encouraged to Make all the. 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