AS-17 SEGMENTAL REPORTING

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A BUSINESS SEGMENT is a distinguishable component of an enterprise that is engaged in providing an individual product or service or a group of related products or services and that is subject to risks and returns that are different from those of other business segments.
 A GEOGRAPHICAL SEGMENT is a distinguishable component of an enterprise that is engaged in providing products or services within a particular economic environment and that is subject to risks and returns that are different from those of components operating in other economic environments.
 The risks and returns of an enterprise are both by the geographical
(1) location of production or service facilities and other assets of an enterprise and
(2) location of its customers. The definition allows geographical segments to be based on any of the two.

 A REPORTABLE SEGMENT is a business segment or a geographical segment identified on the basis of foregoing definitions for which segment information is required to be disclosed by the standard.

 ENTERPRISE REVENUE is revenue is revenue from sales to external customers as reported in the statement of profit and loss. (i.e. Sales made to external customers by all segments)


--> SEGMENT REVENUE is the aggregate of
 (f) revenue directly attributable to segments
 (g) revenue reasonably allocated to segment; and
(h) revenue from transactions with other segments.

 SEGMENT EXPENSE is the aggregate of
(a) operating expense directly attributable to segment
(b) expenses reasonably allocated to segment; and
(c) expenses relating to transactions with other segments.

 However, SEGMENT REVENUE/EXPENSE does not include

 (a) Extraordinary items as defiened in AS-5
(b) Interest or dividend ( including earned/incurred on loans to other segment) unless the operations of the segment are primarily of a financial nature
(c) Gains on sales of investments or on extinguishments of debt (Capital gain/loss) unless the operations of the segment are primarily of a financial nature.
(d) General administration expenses, head office expenses and other expenses that arise at the enterprise level and relate to the enterprise as a whole.

 SEGMENT RESULT is segment revenue less segment expenses.

 SEGMENT ASSETS are those operating assets that are employed by a segment in its operating activities and that either are directly attributable the segment or can be allocated to the segment on a reasonable basis.

SEGMENT LIABILITIES are those operating liabilities that result from operating activities and that either are directly attributable 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 and vice versa.)
  (Segment liabilities do not include income tax liabilities and vice versa.)
 Similarly, if depreciation segment expenses then related assets comes under segment assets.
Primary segment and Secondary segment
 One among the two, Business Segment and Geographical Segment, is primary segment and other becomes secondary segment. The reporting requirements for the primary and secondary segments are different.

  Basis for identifying primary and secondary segments

 Risks and returns are the main criteria for identifying primary and secondary segments.
 If the risks and returns of an enterprise are affected predominantly by differences in the products, business segments are recognized as primary segments and geographical segments as secondary segments and vice versa.
 If the risks and returns of an enterprise are affected both by differences in the products as well as differences in the locations in which it operates, then the enterprise should use business segments as its primary segment and geographical segment as its secondary segment.
  If risks and returns of an enterprise are affected neither by differences in products/services nor by differences in geographical areas of operations, the management may elect any of the two as primary with other being secondary segment.
 (Internal organization and management structure of an enterprise and its system of internal financial reporting to the board of directors and the CEO should normally be the basis for identifying the predominant source and nature of risks and differing rates of return facing the enterprise.)

 Reportable Segments 
A business segment or geographical segment should be identified as reportable segment if:
 (a) its revenue from sales to external customers and from transactions with other segments is 10% or more of the total revenue, external and internal, of all segments; or
(b) its segment result, whether profit or loss, is 10% or more of-
      (1) the combined result of all segments in profit, or
      (2) the combined result of all segments in loss, whichever is greater in absolute amount; or
 (c ) its segment assets are 10% or more of the total assets of all segments.

  A business/reportable segment that is not a reportable segment as per above, may be recognized as reportable segment despite its size at the discretion of the management of the enterprise.

 If total external revenue attributable to reportable segments constitutes less than 75% of the total enterprise revenue, additional segments should be identified as reportable segments, even if they do not meet 10% thresholds as above, until at least 75% percent of the total enterprise revenue is included in reportable segments.

 A segment identified as a reportable segment in the immediately preceding period because it satisfied the relevant 10% thresholds should continue to be a reportable segment for the current period notwithstanding that its revenue, result, and assets no longer meet the 10% thresholds.
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