Each financial situation is different, the advice provided is intended to be general. 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. If the risks and returns of an 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 geographical. 59. 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. 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. In making that judgment, enterprise management takes into account the objective of reporting financial information by segment as set forth in this Statement and the qualitative characteristics of financial statements as identified in the Framework for the Preparation and Presentation of Financial Statements issued by the Institute of Chartered Accountants of India. 44. (i) The portion of enterprise revenue that is directly attributable to a segment. Paragraphs 48-51 identify the disclosure requirements to be applied to each reportable segment based on secondary reporting format of an enterprise, as follows: (a) If primary format of an enterprise is business segments, the required secondary-format disclosures are identified in paragraph 48; (b) If primary format of an enterprise is geographical segments based on location of assets (where the products of the enterprise are produced or where its service rendering operations are based), the required secondary-format disclosures are identified in paragraphs 49 and 50; (c) If primary format of an enterprise is geographical segments based on the location of its customers (where its products are sold or services are rendered), the required secondary-format disclosures are identified in paragraphs 49 and 51. Disclosure of segment cash flow is, therefore, encouraged, though not required. Such disclosure should include a description of the nature of the change, and the financial effect of the change if it is reasonably determinable. 26. ACCOUNTING STANDARD 17 (Segment Reporting) Slideshare uses cookies to improve functionality and performance, and to provide you with relevant advertising. Accounting standard 17 deals with segment reporting that was established to help better understand performance risk and returns of an enterprise. One among the two, Business Segment and Geographical Segment, is primary segment and other becomes secondary segment. 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. 40. 56. 5. revenue from sales to external customers and from transactions with other segments is 10% or more of the total revenue of all segments. Therefore, except in rare circumstances, an enterprise will report segment information in its financial statements on the same basis as it reports internally to top management. Identify the disclosure required for secondary reporting format of an enterprise. Please contact your financial or legal advisors for information specific to your situation. 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. However, costs are sometimes incurred at the enterprise level on behalf of a segment. 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 segment assets have been revalued subsequent to acquisition, then the measurement of segment assets reflects those revaluations. 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. 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. 58. 33. 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. As 17 - Segment Reporting - Free download as Powerpoint Presentation (.ppt / .pptx), PDF File (.pdf), Text File (.txt) or view presentation slides online. Try QuickBooks Invoicing & Accounting Software – 30 Days Free Trial. In case the segments reported internally to the top management do not comply with the definition of the business and geographical segment as mentioned above, in such case management must consider next lower level of internal segmentation that reports informations along product or service lines or geographical lines. Ltd. All rights reserved. Withdrawal of IAS 14 This IFRS supersedes The standard is applied in presenting general purpose financial statements. (i) Enterprises whose equity or debt securities are listed on a recognized stock exchange in India, and enterprises that are in the process of issuing equity or debt securities that will be listed on a recognized stock exchange in India as evidenced by the board of director’s relation in this regard. There is another case where the primary format of segment reporting is geographical segments based on location of customers. This Statement 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 is reported internally to the board of directors and the chief executive officer for purposes of making decision about allocating resources to the segments and assessing its performance and (b) the basis of measurement for this additional information is clearly described. Such changes can have a significant impact on the segment information reported but will not change aggregate financial information reported for the enterprise. 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. 45. 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. If primary format of an enterprise for reporting segment information is geographical segments (whether based on location of assets or location of customers, it should also report the following segment information for each business segment whose revenue from sales to external customers is 10 per cent or more of enterprise revenue or whose segment assets are 10 per cent or more of the total assets of all business segments: (a) Segment revenue from external customers; (b) The total carrying amount of segment assets; and. Require the disclosures in Topic 280, Segment Reporting, to be reported in a … 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. 30. A single business segments does not include products and services with significantly differing risks and returns. 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. Note: It is clarified that individual housing loans will also form part of Retail Banking segment for the purpose of reporting under AS-17. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Examples include changes in identification of segments and changes in the basis for allocating revenues and expenses to segments. 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. 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. 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. Why is it required ? 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. The accounting standard helps readers grasp the well-being of the enterprise, assess the risks involved, and make better informed decisions about the enterprise as a whole. accounting standard - 17 segment reporting j.p., kapur & uberai Slideshare uses cookies to improve functionality and performance, and to provide you with relevant advertising. (e) If applicable, the nature of the regulatory environment, for example, banking, insurance, or public utilities. The following is the text of Accounting Standard 17, ‘Segment Reporting’, issued by the Council of the Institute of Chartered Accountants of India. 42. 32. https://quickbooks.intuit.com/in/resources/accounting-taxes/accounting-standard-17/. 23. Segment assets do not include income tax assets. There can be two possibilities: The entreprise can consider business segments as its primary segment reporting format and geographic segments as its secondary format. Welcome to "AS 17 Segment Reporting" This course focusing on the course topic designed exclusively for you to learn only what you want to learn at your affordable prices. 38. 17. (a) Extraordinary items as defined in AS 5, Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies; (b) Interest expense, including interest incurred on advances or loans from other segments, unless the operations of the segment are primarily of a financial nature; (c) Losses on sales of investments or losses on extinguishment of debt unless the operations of the segment are primarily of a financial nature; (e) General administrative expenses, head-office expenses, and other expenses that arise at the enterprise level and relate to the enterprise as a whole. 57. Following are the items that an entreprise must disclose for each reportable segment: Furthermore, an entreprise need not disclose depreciation and amortization expense as well as non cash expenses of a segment if it reports the amount of cash flows arising from operating, investing and financing activities of such a segment. AS-17: Segment Reporting: Applicability of Accounting Standard: Applicable to Level I Enterprises. 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. 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. 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. 6. 25. 48. feel free to call us +91-9319459510 info@companyvakil.com, October 9, 2018 July 9, 2019. Following are the categories of entreprises to which accounting standard 17 applies for a given accounting period: Business segment is a distinguishable unit of an entreprise engaged in providing individual product or service or a group of related products or services. 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. If segment result includes interest expense then segment assets include related interest-bearing liabilities. 20. Paragraphs 39-46 specify the disclosures required for reportable segments for primary segment reporting format of an enterprise. If a particular item of depreciation or amortisation is included in segment expense, the related asset is also included in segment assets. Factors that should be considered in determining whether products or services are related include: (a) The nature of the products or services; (b) The nature of the production processes; (c) The type or class of customers for the products or services; (d) The methods used to distribute the products or provide the services; and. Such an allocation would not constitute a reasonable basis under the definitions of segment revenue, segment expense, segment assets, and segment liabilities in this Statement. 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. The definition allows geographical segments to be based on either: (a) The location of production or service facilities and other assets of an enterprise; or. Paragraph 40 (b) requires an enterprise to report segment result. 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. Iii to these statements illustrates the application of these units have taken a new turn the... A … as 17 – segment reporting – with analysis, Q & as and examples each customer geographical! 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