Standard 17: Segment Reporting

Standard 17: Segment Reporting · Complied AI

(e)

general administrative expenses, head-office expenses, and other expenses that arise at the

enterprise level and relate to the enterprise as a whole. However, costs are sometimes incurred at the

enterprise

level on behalf of a segment. Such costs are part of segment expense if they relate to the operating activities

the segment and if they can be directly attributed or allocated to the segment on a reasonable basis.

5.7 Segment result is segment revenue less

segment expense.

5.8 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.

If the segment result of a segment includes interest or dividend income, its segment assets include

the

related receivables, loans, investments, or other interest or dividend generating assets.

Segment assets do not include income tax assets.

Segment assets are determined after deducting related allowances/ provisions that are reported as

direct offsets in the balance sheet of the enterprise.

5.9 Segment liabilities are those operating liabilities that result from the

operating activities of a segment and that either are directly attributable to the segment or can be

allocated

to the segment on a reasonable basis.

If the segment result of a segment includes interest expense, its segment liabilities include the

related interest-bearing liabilities.

Segment liabilities do not include income tax liabilities.

5.10 Segment accounting policies are the accounting policies adopted for

preparing and presenting the financial statements of the enterprise as well as those accounting policies

that

relate specifically to segment reporting.

6 The factors in paragraph 5 for identifying business segments and geographical segments are not listed in any

particular order.

7 A single business segment does not include products and services with significantly differing risks and

returns.

While there may be dissimilarities with respect to one or several of the factors listed in the definition of

business segment, the products and services included in a single business segment are expected to be similar

with

respect to a majority of the factors.

8 Similarly, a single geographical segment does not include

operations

in economic environments with significantly differing risks and returns. A geographical segment may be a single

country, a group of two or more countries, or a region within a country.

9 The risks and returns of an enterprise are influenced both by the geographical location of its operations

(where

its products are produced or where its service rendering activities are based) and also by the location of its

customers (where its products are sold or services are rendered). The definition allows geographical segments to

based on either:

(b)

the location of its customers.

10 The organisational and internal reporting structure of an enterprise will normally provide evidence of whether

its

dominant source of geographical risks results from the location of its assets (the origin of its sales) or the

location of its customers (the destination of its sales). 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.

11 Determining the composition of a business or geographical segment involves a certain amount of judgement. In

making that judgement, enterprise management takes into account the objective of reporting financial information

segment as set forth in this Standard and the qualitative characteristics of financial statements as identified

the Framework for the Preparation and Presentation of Financial Statements issued by the Institute of Chartered

Accountants of India. The qualitative characteristics include the relevance, reliability, and comparability over

time of financial information that is reported about the different groups of products and services of an

enterprise

and about its operations in particular geographical areas, and the usefulness of that information for assessing

the

risks and returns of the enterprise as a whole.

12 The predominant sources of risks affect how most enterprises are organised and managed. Therefore, the

organisational structure of an enterprise and its internal financial reporting system are normally the basis for

identifying its segments.

13 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. An enterprise looks to its internal financial reporting system as the starting point for

identifying those items that can be directly attributed, or reasonably allocated, to segments. There is thus a

presumption that amounts that have been identified with segments for internal financial reporting purposes are

directly attributable or reasonably allocable to segments for the purpose of measuring the segment revenue,

segment

expense, segment assets, and segment liabilities of reportable segments.

14 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. Such an allocation would not constitute a

reasonable basis under the definitions of segment revenue, segment expense, segment assets, and segment

liabilities

in this Standard. 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. Such an

item is allocated pursuant to the definitions of segment revenue, segment expense, segment assets, and segment

liabilities in this Standard.

15 Examples of segment assets include current assets that are used in the operating activities of the segment and

tangible and intangible fixed assets. If a particular item of depreciation or amortisation is included in

segment

expense, the related asset is also included in segment assets. Segment assets do not include assets used for

general

enterprise or head-office purposes. Segment assets include operating assets shared by two or more segments if a

reasonable basis for allocation exists. 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

goodwill. If segment assets have been revalued subsequent to acquisition, then the measurement of segment assets

reflects those revaluations.

16 Examples of segment liabilities include trade and other payables, accrued liabilities, customer advances,

product

warranty provisions, and other claims relating to the provision of goods and services. Segment liabilities do

not

include borrowings and other liabilities that are incurred for financing rather than operating purposes. The

liabilities of segments whose operations are not primarily of a financial nature do not include borrowings and

similar liabilities because segment result represents an operating, rather than a net-of-financing, profit or

loss.

Further, because debt is often issued at the head-office level on an enterprise-wide basis, it is often not

possible

to directly attribute, or reasonably allocate, the interest- bearing liabilities to segments.

17 Segment revenue, segment expense, segment assets and segment liabilities are determined before

intra-enterprise

balances and intra-enterprise transactions are eliminated as part of the process of preparation of enterprise

financial statements, except to the extent that such intra-enterprise balances and transactions are within a

single

segment.

18 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, method of pricing

inter-segment transfers, and basis for allocating revenues and expenses to segments.

Identifying Reportable Segments

Primary and Secondary Segment Reporting Formats

19 The dominant source and nature of risks and returns of an enterprise should govern whether its

primary segment reporting format will be business segments or geographical segments. If the risks and returns of

enterprise are affected predominantly by differences in the products and services it produces, its primary

format

for reporting segment information should be business segments, with secondary information reported

geographically.

Similarly, if the risks and returns of the enterprise are affected predominantly by the fact that it operates in

different countries or other geographical areas, its primary format for reporting segment information should be

geographical segments, with secondary information reported for groups of related products and services.

20 Internal organisation and management structure of an enterprise and its system of internal

financial

reporting to the board of directors and the chief executive officer should normally be the basis for identifying

the

predominant source and nature of risks and differing rates of return facing the enterprise and, therefore, for

determining which reporting format is primary and which is secondary, except as provided in sub-paragraphs (a)

and

(b)

if internal organisational and management structure of an enterprise and its system of internal

financial

reporting to the board of directors and the chief executive officer are based neither on individual products

services or groups of related products/services nor on geographical areas, the directors and management of

the

enterprise should determine whether the risks and returns of the enterprise are related more to the products

and

services it produces or to the geographical areas in which it operates and should, accordingly, choose

business

segments or geographical segments as the primary segment reporting format of the enterprise, with the other

its secondary reporting format.

21 For most enterprises, the predominant source of risks and returns determines how the enterprise is organised

and

managed. 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. Therefore, except in rare circumstances, an enterprise will report segment information

its financial statements on the same basis as it reports internally to top management. Its predominant source of

risks and returns becomes its primary segment reporting format. Its secondary source of risks and returns

becomes

its secondary segment reporting format.

22 A ‘matrix presentation’ — both business segments and geographical segments as primary segment reporting

formats

with full segment disclosures on each basis — will often provide useful information if risks and returns of an

enterprise are strongly affected both by differences in the products and services it produces and by differences

the geographical areas in which it operates. This Standard does not require, but does not prohibit, a ‘matrix

presentation’.

23 In some cases, organisation and internal reporting of an enterprise may have developed along lines unrelated

both the types of products and services it produces, and the geographical areas in which it operates. In such

cases,

the internally reported segment data will not meet the objective of this Standard. Accordingly, paragraph 20(b)

requires the directors and management of the enterprise to determine whether the risks and returns of the

enterprise

are more product/service driven or geographically driven and to accordingly choose business segments or

geographical

segments as the primary basis of segment reporting. The objective is to achieve a reasonable degree of

comparability

with other enterprises, enhance understandability of the resulting information, and meet the needs of investors,

creditors, and others for information about product/service-related and geographically- related risks and

returns.

Business and Geographical Segments

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 of

resources,

except as provided in paragraph 25.

25 If internal organisational and management structure of an enterprise and its system of internal

financial reporting to the board of directors and the chief executive officer are based neither on individual

products or services or groups of related products/services nor on geographical areas, paragraph 20(b) requires

that

the directors and management of the enterprise should choose either business segments or geographical segments

the primary segment reporting format of the enterprise based on their assessment of which reflects the primary

source of the risks and returns of the enterprise, with the other as its secondary reporting format. 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 Standard, 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:

(c)

its segment assets are 10 per cent or more of the total assets of all segments.

28 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.

If that segment is not designated as a reportable segment, it should be included as an unallocated reconciling

item.

29 If total external revenue attributable to reportable segments constitutes less than 75 per cent

the total enterprise revenue, additional segments should be identified as reportable segments, even if they do

not

meet the 10 per cent thresholds in paragraph 27, until at least 75 per cent of total enterprise revenue is

included

in reportable segments.

30 The 10 per cent thresholds in this Standard are not intended to be a guide for determining materiality for any

aspect of financial reporting other than identifying reportable business and geographical segments.

Illustration II attached to this Standard presents an illustration of the determination of reportable segments as

per

paragraphs 27-29.

31 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.

32 If a segment is identified as a reportable segment in the current period because it satisfies

the

relevant 10 per cent thresholds, preceding-period segment data that is presented for comparative purposes

should,

unless it is impracticable to do so, be restated to reflect the newly reportable segment as a separate segment,

even

if that segment did not satisfy the 10 per cent thresholds in the preceding period.

Segment Accounting Policies

33 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.

34 There is a presumption that the accounting policies that the directors and management of an enterprise have

chosen

to use in preparing the financial statements of the enterprise as a whole are those that the directors and

management believe are the most appropriate for external reporting purposes. Since the purpose of segment

information is to help users of financial statements better understand and make more informed judgements about

the

enterprise as a whole, this Standard requires the use, in preparing segment information, of the accounting

policies

adopted for preparing and presenting the financial statements of the enterprise as a whole. That does not mean,

however, that the enterprise accounting policies are to be applied to reportable segments as if the segments

were

separate stand-alone reporting entities. A detailed calculation done in applying a particular accounting policy

the enterprise-wide level may be allocated to segments if there is a reasonable basis for doing so. Pension

calculations, for example, often are done for an enterprise as a whole, but the enterprise-wide figures may be

allocated to segments based on salary and demographic data for the segments.

35 This Standard does not prohibit the disclosure of additional segment information that is prepared on a basis

other

than the accounting policies adopted for the enterprise financial statements provided that (a) the information

reported internally to the board of directors and the chief executive officer for purposes of making decisions

about

allocating resources to the segment and assessing its performance and (b) the basis of measurement for this

additional information is clearly described.

36 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.

37 The way in which asset, liability, revenue, and expense items are allocated to segments depends on such

factors as

the nature of those items, the activities conducted by the segment, and the relative autonomy of that segment.

It is

not possible or appropriate to specify a single basis of allocation that should be adopted by all enterprises;

nor

is it appropriate to force allocation of enterprise asset, liability, revenue and expense items that relate

jointly

to two or more segments, if the only basis for making those allocations is arbitrary. At the same time, the

definitions of segment revenue, segment expense, segment assets and segment liabilities are interrelated, and

the

resulting allocations should be consistent. Therefore, jointly used assets and liabilities are allocated to

segments

if, and only if, their related revenues and expenses also are allocated to those segments. For example, an asset

included in segment assets if, and only if, the related depreciation or amortisation is included in segment

expense.

Disclosure

38 Paragraphs 39-46 specify the disclosures required for reportable segments for primary segment reporting format

an enterprise. Paragraphs 47-51 identify the disclosures required for secondary reporting format of an

enterprise.

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 considerably less disclosure on the secondary

basis.

Paragraphs 53-59 address several other segment disclosure matters. Illustration III attached to this Standard

illustrates the application of these disclosure standards.

Explanation

Explanation:

In case, by applying the definitions of ‘business segment’ and ‘geographical segment’, it is concluded that there

neither more than one business segment nor more than one geographical segment, segment information as per this

Standard is not required to be disclosed. However, the fact that there is only one ‘business segment’ and

‘geographical segment’ is disclosed by way of a note.

Primary Reporting Format

39 The disclosure requirements in paragraphs 40-46 should be applied to each reportable segment

based

on primary reporting format of an enterprise.

40 An enterprise should disclose the following for each reportable segment:

(g)

total amount of significant non-cash expenses, other than depreciation and amortisation in respect of

segment assets, that were included in segment expense and, therefore, deducted in measuring segment result.

41 Paragraph 40 (b) requires an enterprise to report segment result. 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. 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.

42 An example of a measure of segment performance above segment result in the statement of profit and loss is

gross

margin on sales. Examples of measures of segment performance below segment result in the statement of profit and

loss are profit or loss from ordinary activities (either before or after income taxes) and net profit or loss.

43 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”. Examples of such items include write- downs

inventories, provisions for restructuring, disposals of fixed assets and long-term investments, legislative

changes

having retrospective application, litigation settlements, and reversal of provisions. An enterprise is

encouraged,

but not required, to disclose the nature and amount of any items of segment revenue and segment expense that are

such size, nature, or incidence that their disclosure is relevant to explain the performance of the segment for

the

period. Such disclosure is not intended to change the classification of any such items of revenue or expense

from

ordinary to extraordinary or to change the measurement of such items. 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.

44. An enterprise that reports the amount of cash flows arising from operating, investing and

financing

activities of a segment need not disclose depreciation and amortisation expense and non-cash expenses of such

segment pursuant to sub-paragraphs (f) and (g) of paragraph 40.

45 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. Disclosure of information regarding operating, investing and financing cash

flows of each reportable segment is relevant to understanding the enterprise’s overall financial position,

liquidity, and cash flows. Disclosure of segment cash flow is, therefore, encouraged, though not required. An

enterprise that provides segment cash flow disclosures need not disclose depreciation and amortisation expense

and

non-cash expenses pursuant to sub- paragraphs (f) and (g) of paragraph 40.

46 An enterprise should present a reconciliation between the information disclosed for reportable

segments and the aggregated information in the enterprise financial statements. In presenting the

reconciliation,

segment revenue should be reconciled to enterprise revenue; segment result should be reconciled to enterprise

net

profit or loss; segment assets should be reconciled to enterprise assets; and segment liabilities should be

reconciled to enterprise liabilities.

Secondary Segment Information

47 Paragraphs 39-46 identify the disclosure requirements to be applied to each reportable segment based on

primary

reporting format of an enterprise. Paragraphs 48-51 identify the disclosure requirements to be applied to each

reportable segment based on secondary reporting format of an enterprise, as follows:

(b)

the total cost incurred during the period to acquire segment assets that are expected to be used during

than one period (tangible and intangible fixed assets) by location of the assets.

Illustrative Segment Disclosures

52 Illustration III attached to this Standard Illustrates the disclosures for primary and secondary formats that

are

required by this Standard.

Other Disclosures

53 In measuring and reporting segment revenue from transactions with other segments, inter-segment

transfers should be measured on the basis that the enterprise actually used to price those transfers. The basis

pricing inter-segment transfers and any change therein should be disclosed in the financial statements.

54 Changes in accounting policies adopted for segment reporting that have a material effect on

segment

information should be disclosed. Such disclosure should include a description of the nature of the change, and

the

financial effect of the change if it is reasonably determinable.

55 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.

56 Changes in accounting policies adopted at the enterprise level that affect segment information are dealt with

accordance with AS 5. AS 5 requires that any change in an accounting policy which has a material effect should

disclosed. The impact of, and the adjustments resulting from, such change, if material, should be shown in the

financial statements of the period in which such change is made, to reflect the effect of such change. Where the

effect of such change is not ascertainable, wholly or in part, the fact should be indicated. If a change is made

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 Some changes in accounting policies relate specifically to segment reporting. Examples include changes in

identification of segments and changes in the basis for allocating revenues and expenses to segments. Such

changes

can have a significant impact on the segment information reported but will not change aggregate financial

information reported for the enterprise. To enable users to understand the impact of such changes, this Standard

requires the disclosure of the nature of the change and the financial effect of the change, if reasonably

determinable.

58 An enterprise should indicate the types of products and services included in each reported

business

segment and indicate the composition of each reported geographical segment, both primary and secondary, if not

otherwise disclosed in the financial statements.

59 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. Similarly, to assess the impact of changes in the economic and

political

environment on the risks and returns of a geographical segment, it is important to know the composition of that

geographical segment.

Illustration I

Segment Definition Decision Tree

The purpose of this illustration is illustrate the application of

paragraphs (24-32) of the Accounting Standard

Illustration II

Illustration on Determination of

ReportableSegments (Paragraphs 27-29)

This illustration does not form part of the Accounting Standard. Its purpose is to illustrate the

application of paragraphs 27-29 of the Accounting Standard.

An enterprise operates through eight segments, namely, A, B, C, D, E, F, G and H. The relevant

information about these segments is given in the following table (amounts in Rs.'000):

Total(Segments)

Total (Enterprise)

1. SEGMENT REVENUE

(100)

6. Segment Result as a percentage of the greater of the totals arrived at 4 and 5 above in absolute

amount(i.e., 100)

7. SEGMENT ASSETS

100

8. Segment assets as a percentage of total assets of all segments

The reportable segments of the enterprise will be identified as below:

(a)

In accordance with paragraph 27(a), segments whose total revenue from external sales and inter-segment sales

10% or more of the total revenue of all segments, external and internal, should be identified as reportable

segments. Therefore, Segments A and B are reportable segments.

(b)

As per the requirements of paragraph 27(b), it is to be first identified Whether the combined result of all

segments in profit or the comb ned result of all segments in loss is greater in absolute amount From the table,

is evident that combined result in loss (i.e. Rs.1,00,000) is greater. Therefore, the individual segment result

as a

percentage of Rs.1,00,000 needs to be examined. In accordance with paragraph 27(b), Segments B and C are

reportable

segments as their segment result is more than the threshold limit of 10%.

(c)

Segments A,B and D are reportable segments as per paragraph 27(c),as their segment assets are more than 10%

the total segment assets.

Thus,Segments A, B, C, and D are reportable segments in terms of the criteria laid down in paragraph 27.

Paragraph 28 of the Standard gives an option to the management of the enterprise to designate any segment as a

reportable segment In the given case, it is presumed that the management decides to designate SegmentE as a

reportable segment

Paragraph 29 requires that if total external revenue attributable to reportable segments identified as aforesaid

constitutes less than 75% of the total enterprise revenue, additional segments should be identified as

reportable

segments even if they do not meet the 10% thresholds in paragraph 27, until at least 75% of total enterprise

revenue

is included in reportable segments.

The total external revenue of Segments A, B, C, D and E-identified above as reportable segments, is Rs.2,95,000.

This is less than 75% of total enterprise revenue of Rs.4,00,000. The management of the enterprise is required

designate any one or more of the remaining segments as reportable segment(s) so that the external revenue of

reportable segments is at least 75% of the total enterprise revenue Suppose, the management designates Segment H

for

this purpose. Now the external revenue of reportable segments is more than 75% of the total enterprise revenue.

Segments A, B, C, D, E and H are reportable segments. Segments F and G will be shown as reconciling items.

(3)

Net profit

OTHER INFORMATION

Segment assets

108

Unallocated corporate assets

Total assets

175

155

Segment liabilities

Unallocated corporate liabilities

Total liabilities

Capital expenditure

Depreciation

Non-cash expenses other than depreciation

Note xx-Business and Geographical Segments (amounts in Rs-lakhs)

Business segments: For management purposes, the Company is organised on a worldwide basis into three major

operating divisionpaper products, office products and publishing - each headed by a senior vice president. The

divisions are the basis on which the company reports its primary segment information The paper products segment

produces a broad range of writing and publishing papers and newsprint The office products segment manufactures

labels, binders, pens, and markers and also distributes office products made by others- The publishing segment

develops and sells books in the fields of taxation, law and accounting Other operations include development of

computer software for standard and specialised business applications. Financial information about business

segments

is presented in the above table.

Geographical segments: Although the Company's major operating divisions are managed on a worldwide basis,

they

operate in four principal geographical areas of the world. In India, its home country, the Company produces and

sells a broad range of papers and office products. Additionally, all of the Company's publishing and computer

software development operations are conducted in India. In the European Union, the Company operates paper and

office

products manufacturing facilities and sales offices in the following countries: France, Belgium, Germany and the

Operations in Canada and the United States are essentially similar and consist of manufacturing papers and news

print that are sold entirely within those two countries. Operations in Indonesia include the production of paper

pulp and the manufacture of writing and publishing papers and office products, almost all of which is sold

outside

Indonesia, both to other segments of the company and to external customers.

Sales by market: The following table shows the distribution of the Company's consolidated sales by

geographical market regardless of where the goods were produced:

Sales Revenue by Geographical Market

Current Year

Previous Year

India

European Union

Canada and the United States

Mexico and South America

Southeast Asia (principally Japan and Taiwan)

Assets and additions to tangible and intangible fixed assets by geographical area: The following table

shows

the carrying amount of segment assets and additions to tangible and intangible fixed assets by geographical area

which the assets are located:

Carrying Amount of Segment Assets

Additions of Fixed Assets and Intangible Assets

Current Year

Previous Year

Current Year

Previous Year

India

European Union

Canada and the United States

Indonesia

175

155

Segment revenue and expense : In India, paper and office products are manufactured in

combined

facilities and are sold by a combined sales force. Joint revenues and expenses are allocated to the two

business

segments on a reasonable basis. All other segment revenue and expense are directly attributable to the

segments.

Segment assets and liabilities : Segment assets include all operating assets used by a

segment

and consist principally of operating cash, debtors, inventories and fixed assets, net of allowances and

provisions which are reported as direct offsets in the balance sheet. While most such assets can be directly

attributed to individual segments, the carrying amount of certain assets used jointly by two or more

segments is

allocated to the segments on a reasonable basis. Segment liabilities include all operating liabilities and

consist principally of creditors and accrued liabilities. Segment assets and liabilities do not include

deferred

income taxes.

Inter-segment transfers : Segment revenue, segment expenses and segment result include

transfers between business segments and between geographical segments. Such transfers are accounted for at

competitive market prices charged to unaffiliated customers for similar goods. Those transfers are

eliminated in

consolidation.

Unusual item : Sales of office products to external customers in the current year were

adversely affected by a lengthy strike of transportation workers in India, which interrupted product

shipments

for approximately four months. The Company estimates that sales of office products during the four-month

period

were approximately half of what they would otherwise have been.

Extraordinary loss : As more fully discussed in Note x, the Company incurred an uninsured

loss

of Rs.3,00,000 caused by earthquake damage to a paper mill in India during the previous year.

Illustration IV

Summary of Required Disclosure

This illustration does not form part of the Accounting Standard. Its purpose is to summarise the

disclosures required by paragraphs 38-59 for each of the three possible primary segment reporting formats.

Figures in parentheses refer to paragraph numbers of the relevant paragraphs in the text.

PRIMARY FORMAT IS BUSINESS SEGMENTS

PRIMARY

FORMAT IS GEOGRAPHICAL SEGMENTS BY LOCATION OF ASSETS

PRIMARY

FORMAT IS GEOGRAPHICAL SEGMENTS BY LOCATION OF CUSTOMERS

Required Primary Disclosures

Required

Primary Disclosures

Required Primary Disclosures

Revenue from external customers by business segment [40(a)]

Revenue

from external customers by location of assets [40(a)]

Revenue from external customers by location of customers [40(a)]

Revenue from transactions with other segments by business segment [40(a)]

Revenue from transactions with other segments by location of assets [40(a)]

Revenue from transactions with other segments by location of customers [40(a)]

Segment result by business segment [40(b)]

Segment result by location of assets [40(b)]

Segment result by location of customers [40(b)]

Carrying amount of segment assets by business segment [40(c)]

Carrying amount of segment assets by location of assets [40(c)]

Carrying amount of segment assets by location of customers [40(c)]

Segment liabilities by business segment [40(d)]

Segment

liabilities by location of assets [40(d)]

Segment liabilities by location of customers [40(d)]

Cost to acquire tangible and intangible fixed assets by business segment [40(e)]

Cost to acquire tangible and intangible fixed assets by location of assets [40(e)]

Cost to acquire tangible and intangible fixed assets by location of customers [40(e)]

Depreciation and amortisation expense by business segment [40(f)]

Depreciation and amortisation expense by location of assets[40(f)]

Depreciation and amortisation expense by location of

customers[40(f)]

Non-cash expenses other than depreciation and amortisation by business segment [40(g)]

Non-cash expenses other than depreciation and amortisation by location of assets [40(g)]

Non-cash expenses other than depreciation and amortisation by location of customers [40(g)]

Reconciliation of revenue, result, assets, and liabilities by business segment [46]

Reconciliation of revenue, result, assets, and liabilities [46]

Revenue from external customers by location of customers [48]

Revenue from external customers by business segment [49]

Carrying amount of segment assets by location of assets [48]

Carrying amount of segment assets by business segment [49]

Cost to acquire tangible and intangible fixed assets by location of assets [48]

Cost to acquire tangible and intangible fixed assets by business segment [49]

Revenue from external customers by geographical customers if different from location of assets

[50]

Carrying amount of segment assets by location of assets if different from location of customers

[51]

Cost to acquire tangible and intangible fixed assets by location of assets if different from

location of customers [51]

Other

Required Disclosures

Other Required Disclosures

Other

Required Disclosures

Basis of pricing inter- segment transfers and any change therein [53]

Changes in segment accounting policies [54]

Types of products and services in each business segment [58]

Composition of each geographical segment [58]

Footnotes

* The Standard was earlier notified as part of Companies

(Accounting Standards) Rules, 2006, under Companies Act, 1956. The Standard has been notified as part of

Companies

(Accounting Standards) Rules, 2021, under Companies Act, 2013.

1 Attention is specifically drawn to paragraph 4.3 of the Preface , according to which Accounting Standards are

intended

to apply only to items which are material.