Segment Reporting: Disclosure Requirements for Reporting Operating Segments
in Financial Statements
Introduction
Segment reporting provides useful information to users of financial statements to better
evaluate past performance and future prospects of a company. It helps identify sources of
risks and opportunities from distinct businesses and operations. International Accounting
Standard (IAS) 14 and Ind AS 108 define an operating segment as a component of an entity
engaged in business activities from which it earns revenue and incurs expenses whose
operating results are regularly reviewed by the entity's chief operating decision maker. This
report discusses key disclosure requirements for reporting operating segments as per
prevalent accounting standards.
Factors Considered for Identifying Operating Segments
Accounting standards provide guidelines on how an entity should identify its operating
segments. Operating segments are generally determined based on:
- Nature of products and services: Segments offering distinct products/services get reported
separately.
- Nature of production processes: Business activities having dissimilar production processes
like mining, manufacturing are separate segments.
- Type/class of customer served: Segments targeting divergent customer types like
business/domestic customers warrant individual disclosure.
- Method of distribution: Segments distributing through unique channels like wholesale/retail
need individual presentation.
- Regulatory environments: Operations in diversified regulatory regimes are reported
independently, say manufacturing/utilities.
Entities aggregate operating segments exhibiting similar long-term economic characteristics,
products/services, customer types etc. into one reportable segment.
Required Disclosure for Each Reportable Segment
At a minimum, the following quantitative information should be presented for each
reportable operating segment identified:
- Revenue from external customers and inter-segment revenue
- Interest revenue and expense
- Depreciation and amortization
- Material non-cash items like impairments
- Share of profit/loss of associates and joint ventures
- Segment assets and liabilities
- Capital additions to non-current segment assets
- Significant non-cash items besides depreciation/amortization
Information disclosed enables users to evaluate nature and financial impacts of activities
within each segment.
Information About Products/Services
Disclosures should present revenues from major products/service lines contributing 10% or
more of total entity revenues. This aids in understanding sources of risks/rewards from key
goods/services.
Geographic Information
If revenues, assets or results depend on economic environments differently, information on
attribution between geographical areas is essential. Format of presentation varies based on
diversity in risk profiles.
Information About Major Customers
Revenues from any single customer exceeding 10% of total entity revenues must be reported
to highlight concentration risks.
Reconciliations of Segment Information
A reconciliation of total reportable segment measures to consolidated amounts in financial
statements should be furnished. Unallocated items comprise head office expenses, financing
gains/losses etc.
Measurement Policies and Inter-Segment Transfers
Consistent measurement policies and elimination approaches followed across segments
should be explained. Basis/method of transfers between segments requires disclosure.
Factors Used by Management to Identify Reportable Segments
Key factors like operating results regularly reviewed by chief executive and segments for
which discrete information is available are presented. This helps understand management
philosophy for segmental evaluation.
Entity-Wide Disclosures
Details on products/services, geographical regions contributing major revenues, exports
across countries etc. help get overarching perspective.
Case Study Disclosing Segments
ABC Ltd manufactures FMCG products. It has two reportable segments - Foods (Revenues
$50 million) and Homecare (Revenues $30 million). Additional information disclosed in
financial statements:
By Product: Breakup of Foods revenues from Snacks 50%, Biscuits 30%,Others 20%
By Geography: Revenues - India $60m, Southeast Asia $15m, Others $5m. Assets - India
$40m, Southeast Asia $12m.
Major Customer: Revenues from XYZ Stores exceed 10% of total at $15 million.
Chief Operating Decision Maker reviews segment profits regularly. Consistent accounting
policies applied. This type of granular disclosure enables users to evaluate risks/prospects
from different lenses.
Conclusion
Identification of operating segments linked with internal management reporting and
consistent quantitative/qualitative disclosures aid stakeholders in comprehending an entity's
diverse activities and associated risks. Segment reporting supplements insights available from
consolidated financial statements. Complying with accounting standards ensures relevance,
transparency and comparability. Overall, the disclosures empower external parties to study
profitability drivers, make projections and efficiently allocate resources.
Segment reporting provides useful information to users of financial statements to better
evaluate past performance and future prospects of a company. It helps identify sources of
risks and opportunities from distinct businesses and operations. International Accounting
Standard (IAS) 14 and Ind AS 108 define an operating segment as a component of an entity
engaged in business activities from which it earns revenue and incurs expenses whose
operating results are regularly reviewed by the entity's chief operating decision maker. This
report discusses key disclosure requirements for reporting operating segments as per
prevalent accounting standards.
Factors Considered for Identifying Operating Segments
Accounting standards provide guidelines on how an entity should identify its operating
segments. Operating segments are generally determined based on:
- Nature of products and services: Segments offering distinct products/services get reported
separately.
- Nature of production processes: Business activities having dissimilar production processes
like mining, manufacturing are separate segments.
- Type/class of customer served: Segments targeting divergent customer types like
business/domestic customers warrant individual disclosure.
- Method of distribution: Segments distributing through unique channels like wholesale/retail
need individual presentation.
- Regulatory environments: Operations in diversified regulatory regimes are reported
independently, say manufacturing/utilities.
Entities aggregate operating segments exhibiting similar long-term economic characteristics,
products/services, customer types etc. into one reportable segment.
Required Disclosure for Each Reportable Segment
At a minimum, the following quantitative information should be presented for each
reportable operating segment identified:
- Revenue from external customers and inter-segment revenue
- Interest revenue and expense
- Depreciation and amortization
- Material non-cash items like impairments
- Share of profit/loss of associates and joint ventures
- Segment assets and liabilities
- Capital additions to non-current segment assets
- Significant non-cash items besides depreciation/amortization
Information disclosed enables users to evaluate nature and financial impacts of activities
within each segment.
Information About Products/Services
Disclosures should present revenues from major products/service lines contributing 10% or
more of total entity revenues. This aids in understanding sources of risks/rewards from key
goods/services.
Geographic Information
If revenues, assets or results depend on economic environments differently, information on
attribution between geographical areas is essential. Format of presentation varies based on
diversity in risk profiles.
Information About Major Customers
Revenues from any single customer exceeding 10% of total entity revenues must be reported
to highlight concentration risks.
Reconciliations of Segment Information
A reconciliation of total reportable segment measures to consolidated amounts in financial
statements should be furnished. Unallocated items comprise head office expenses, financing
gains/losses etc.
Measurement Policies and Inter-Segment Transfers
Consistent measurement policies and elimination approaches followed across segments
should be explained. Basis/method of transfers between segments requires disclosure.
Factors Used by Management to Identify Reportable Segments
Key factors like operating results regularly reviewed by chief executive and segments for
which discrete information is available are presented. This helps understand management
philosophy for segmental evaluation.
Entity-Wide Disclosures
Details on products/services, geographical regions contributing major revenues, exports
across countries etc. help get overarching perspective.
Case Study Disclosing Segments
ABC Ltd manufactures FMCG products. It has two reportable segments - Foods (Revenues
$50 million) and Homecare (Revenues $30 million). Additional information disclosed in
financial statements:
By Product: Breakup of Foods revenues from Snacks 50%, Biscuits 30%,Others 20%
By Geography: Revenues - India $60m, Southeast Asia $15m, Others $5m. Assets - India
$40m, Southeast Asia $12m.
Major Customer: Revenues from XYZ Stores exceed 10% of total at $15 million.
Chief Operating Decision Maker reviews segment profits regularly. Consistent accounting
policies applied. This type of granular disclosure enables users to evaluate risks/prospects
from different lenses.
Conclusion
Identification of operating segments linked with internal management reporting and
consistent quantitative/qualitative disclosures aid stakeholders in comprehending an entity's
diverse activities and associated risks. Segment reporting supplements insights available from
consolidated financial statements. Complying with accounting standards ensures relevance,
transparency and comparability. Overall, the disclosures empower external parties to study
profitability drivers, make projections and efficiently allocate resources.
Segment reporting provides useful information to users of financial statements to better
evaluate past performance and future prospects of a company. It helps identify sources of
risks and opportunities from distinct businesses and operations. International Accounting
Standard (IAS) 14 and Ind AS 108 define an operating segment as a component of an entity
engaged in business activities from which it earns revenue and incurs expenses whose
operating results are regularly reviewed by the entity's chief operating decision maker. This
report discusses key disclosure requirements for reporting operating segments as per
prevalent accounting standards.
Factors Considered for Identifying Operating Segments
Accounting standards provide guidelines on how an entity should identify its operating
segments. Operating segments are generally determined based on:
- Nature of products and services: Segments offering distinct products/services get reported
separately.
- Nature of production processes: Business activities having dissimilar production processes
like mining, manufacturing are separate segments.
- Type/class of customer served: Segments targeting divergent customer types like
business/domestic customers warrant individual disclosure.
- Method of distribution: Segments distributing through unique channels like wholesale/retail
need individual presentation.
- Regulatory environments: Operations in diversified regulatory regimes are reported
independently, say manufacturing/utilities.
Entities aggregate operating segments exhibiting similar long-term economic characteristics,
products/services, customer types etc. into one reportable segment.
Required Disclosure for Each Reportable Segment
At a minimum, the following quantitative information should be presented for each
reportable operating segment identified:
- Revenue from external customers and inter-segment revenue
- Interest revenue and expense
- Depreciation and amortization
- Material non-cash items like impairments
- Share of profit/loss of associates and joint ventures
- Segment assets and liabilities
- Capital additions to non-current segment assets
- Significant non-cash items besides depreciation/amortization
Information disclosed enables users to evaluate nature and financial impacts of activities
within each segment.
Information About Products/Services
Disclosures should present revenues from major products/service lines contributing 10% or
more of total entity revenues. This aids in understanding sources of risks/rewards from key
goods/services.
Geographic Information
If revenues, assets or results depend on economic environments differently, information on
attribution between geographical areas is essential. Format of presentation varies based on
diversity in risk profiles.
Information About Major Customers
Revenues from any single customer exceeding 10% of total entity revenues must be reported
to highlight concentration risks.
Reconciliations of Segment Information
A reconciliation of total reportable segment measures to consolidated amounts in financial
statements should be furnished. Unallocated items comprise head office expenses, financing
gains/losses etc.
Measurement Policies and Inter-Segment Transfers
Consistent measurement policies and elimination approaches followed across segments
should be explained. Basis/method of transfers between segments requires disclosure.
Factors Used by Management to Identify Reportable Segments
Key factors like operating results regularly reviewed by chief executive and segments for
which discrete information is available are presented. This helps understand management
philosophy for segmental evaluation.
Entity-Wide Disclosures
Details on products/services, geographical regions contributing major revenues, exports
across countries etc. help get overarching perspective.
Case Study Disclosing Segments
ABC Ltd manufactures FMCG products. It has two reportable segments - Foods (Revenues
$50 million) and Homecare (Revenues $30 million). Additional information disclosed in
financial statements:
By Product: Breakup of Foods revenues from Snacks 50%, Biscuits 30%,Others 20%
By Geography: Revenues - India $60m, Southeast Asia $15m, Others $5m. Assets - India
$40m, Southeast Asia $12m.
Major Customer: Revenues from XYZ Stores exceed 10% of total at $15 million.
Chief Operating Decision Maker reviews segment profits regularly. Consistent accounting
policies applied. This type of granular disclosure enables users to evaluate risks/prospects
from different lenses.
Conclusion
Identification of operating segments linked with internal management reporting and
consistent quantitative/qualitative disclosures aid stakeholders in comprehending an entity's
diverse activities and associated risks. Segment reporting supplements insights available from
consolidated financial statements. Complying with accounting standards ensures relevance,
transparency and comparability. Overall, the disclosures empower external parties to study
profitability drivers, make projections and efficiently allocate resources.
Segment reporting provides useful information to users of financial statements to better
evaluate past performance and future prospects of a company. It helps identify sources of
risks and opportunities from distinct businesses and operations. International Accounting
Standard (IAS) 14 and Ind AS 108 define an operating segment as a component of an entity
engaged in business activities from which it earns revenue and incurs expenses whose
operating results are regularly reviewed by the entity's chief operating decision maker. This
report discusses key disclosure requirements for reporting operating segments as per
prevalent accounting standards.
Factors Considered for Identifying Operating Segments
Accounting standards provide guidelines on how an entity should identify its operating
segments. Operating segments are generally determined based on:
- Nature of products and services: Segments offering distinct products/services get reported
separately.
- Nature of production processes: Business activities having dissimilar production processes
like mining, manufacturing are separate segments.
- Type/class of customer served: Segments targeting divergent customer types like
business/domestic customers warrant individual disclosure.
- Method of distribution: Segments distributing through unique channels like wholesale/retail
need individual presentation.
- Regulatory environments: Operations in diversified regulatory regimes are reported
independently, say manufacturing/utilities.
Entities aggregate operating segments exhibiting similar long-term economic characteristics,
products/services, customer types etc. into one reportable segment.
Required Disclosure for Each Reportable Segment
At a minimum, the following quantitative information should be presented for each
reportable operating segment identified:
- Revenue from external customers and inter-segment revenue
- Interest revenue and expense
- Depreciation and amortization
- Material non-cash items like impairments
- Share of profit/loss of associates and joint ventures
- Segment assets and liabilities
- Capital additions to non-current segment assets
- Significant non-cash items besides depreciation/amortization
Information disclosed enables users to evaluate nature and financial impacts of activities
within each segment.
Information About Products/Services
Disclosures should present revenues from major products/service lines contributing 10% or
more of total entity revenues. This aids in understanding sources of risks/rewards from key
goods/services.
Geographic Information
If revenues, assets or results depend on economic environments differently, information on
attribution between geographical areas is essential. Format of presentation varies based on
diversity in risk profiles.
Information About Major Customers
Revenues from any single customer exceeding 10% of total entity revenues must be reported
to highlight concentration risks.
Reconciliations of Segment Information
A reconciliation of total reportable segment measures to consolidated amounts in financial
statements should be furnished. Unallocated items comprise head office expenses, financing
gains/losses etc.
Measurement Policies and Inter-Segment Transfers
Consistent measurement policies and elimination approaches followed across segments
should be explained. Basis/method of transfers between segments requires disclosure.
Factors Used by Management to Identify Reportable Segments
Key factors like operating results regularly reviewed by chief executive and segments for
which discrete information is available are presented. This helps understand management
philosophy for segmental evaluation.
Entity-Wide Disclosures
Details on products/services, geographical regions contributing major revenues, exports
across countries etc. help get overarching perspective.
Case Study Disclosing Segments
ABC Ltd manufactures FMCG products. It has two reportable segments - Foods (Revenues
$50 million) and Homecare (Revenues $30 million). Additional information disclosed in
financial statements:
By Product: Breakup of Foods revenues from Snacks 50%, Biscuits 30%,Others 20%
By Geography: Revenues - India $60m, Southeast Asia $15m, Others $5m. Assets - India
$40m, Southeast Asia $12m.
Major Customer: Revenues from XYZ Stores exceed 10% of total at $15 million.
Chief Operating Decision Maker reviews segment profits regularly. Consistent accounting
policies applied. This type of granular disclosure enables users to evaluate risks/prospects
from different lenses.
Conclusion
Identification of operating segments linked with internal management reporting and
consistent quantitative/qualitative disclosures aid stakeholders in comprehending an entity's
diverse activities and associated risks. Segment reporting supplements insights available from
consolidated financial statements. Complying with accounting standards ensures relevance,
transparency and comparability. Overall, the disclosures empower external parties to study
profitability drivers, make projections and efficiently allocate resources.
Segment reporting provides useful information to users of financial statements to better
evaluate past performance and future prospects of a company. It helps identify sources of
risks and opportunities from distinct businesses and operations. International Accounting
Standard (IAS) 14 and Ind AS 108 define an operating segment as a component of an entity
engaged in business activities from which it earns revenue and incurs expenses whose
operating results are regularly reviewed by the entity's chief operating decision maker. This
report discusses key disclosure requirements for reporting operating segments as per
prevalent accounting standards.
Factors Considered for Identifying Operating Segments
Accounting standards provide guidelines on how an entity should identify its operating
segments. Operating segments are generally determined based on:
- Nature of products and services: Segments offering distinct products/services get reported
separately.
- Nature of production processes: Business activities having dissimilar production processes
like mining, manufacturing are separate segments.
- Type/class of customer served: Segments targeting divergent customer types like
business/domestic customers warrant individual disclosure.
- Method of distribution: Segments distributing through unique channels like wholesale/retail
need individual presentation.
- Regulatory environments: Operations in diversified regulatory regimes are reported
independently, say manufacturing/utilities.
Entities aggregate operating segments exhibiting similar long-term economic characteristics,
products/services, customer types etc. into one reportable segment.
Required Disclosure for Each Reportable Segment
At a minimum, the following quantitative information should be presented for each
reportable operating segment identified:
- Revenue from external customers and inter-segment revenue
- Interest revenue and expense
- Depreciation and amortization
- Material non-cash items like impairments
- Share of profit/loss of associates and joint ventures
- Segment assets and liabilities
- Capital additions to non-current segment assets
- Significant non-cash items besides depreciation/amortization
Information disclosed enables users to evaluate nature and financial impacts of activities
within each segment.
Information About Products/Services
Disclosures should present revenues from major products/service lines contributing 10% or
more of total entity revenues. This aids in understanding sources of risks/rewards from key
goods/services.
Geographic Information
If revenues, assets or results depend on economic environments differently, information on
attribution between geographical areas is essential. Format of presentation varies based on
diversity in risk profiles.
Information About Major Customers
Revenues from any single customer exceeding 10% of total entity revenues must be reported
to highlight concentration risks.
Reconciliations of Segment Information
A reconciliation of total reportable segment measures to consolidated amounts in financial
statements should be furnished. Unallocated items comprise head office expenses, financing
gains/losses etc.
Measurement Policies and Inter-Segment Transfers
Consistent measurement policies and elimination approaches followed across segments
should be explained. Basis/method of transfers between segments requires disclosure.
Factors Used by Management to Identify Reportable Segments
Key factors like operating results regularly reviewed by chief executive and segments for
which discrete information is available are presented. This helps understand management
philosophy for segmental evaluation.
Entity-Wide Disclosures
Details on products/services, geographical regions contributing major revenues, exports
across countries etc. help get overarching perspective.
Case Study Disclosing Segments
ABC Ltd manufactures FMCG products. It has two reportable segments - Foods (Revenues
$50 million) and Homecare (Revenues $30 million). Additional information disclosed in
financial statements:
By Product: Breakup of Foods revenues from Snacks 50%, Biscuits 30%,Others 20%
By Geography: Revenues - India $60m, Southeast Asia $15m, Others $5m. Assets - India
$40m, Southeast Asia $12m.
Major Customer: Revenues from XYZ Stores exceed 10% of total at $15 million.
Chief Operating Decision Maker reviews segment profits regularly. Consistent accounting
policies applied. This type of granular disclosure enables users to evaluate risks/prospects
from different lenses.
Conclusion
Identification of operating segments linked with internal management reporting and
consistent quantitative/qualitative disclosures aid stakeholders in comprehending an entity's
diverse activities and associated risks. Segment reporting supplements insights available from
consolidated financial statements. Complying with accounting standards ensures relevance,
transparency and comparability. Overall, the disclosures empower external parties to study
profitability drivers, make projections and efficiently allocate resources.
Segment reporting provides useful information to users of financial statements to better
evaluate past performance and future prospects of a company. It helps identify sources of
risks and opportunities from distinct businesses and operations. International Accounting
Standard (IAS) 14 and Ind AS 108 define an operating segment as a component of an entity
engaged in business activities from which it earns revenue and incurs expenses whose
operating results are regularly reviewed by the entity's chief operating decision maker. This
report discusses key disclosure requirements for reporting operating segments as per
prevalent accounting standards.
Factors Considered for Identifying Operating Segments
Accounting standards provide guidelines on how an entity should identify its operating
segments. Operating segments are generally determined based on:
- Nature of products and services: Segments offering distinct products/services get reported
separately.
- Nature of production processes: Business activities having dissimilar production processes
like mining, manufacturing are separate segments.
- Type/class of customer served: Segments targeting divergent customer types like
business/domestic customers warrant individual disclosure.
- Method of distribution: Segments distributing through unique channels like wholesale/retail
need individual presentation.
- Regulatory environments: Operations in diversified regulatory regimes are reported
independently, say manufacturing/utilities.
Entities aggregate operating segments exhibiting similar long-term economic characteristics,
products/services, customer types etc. into one reportable segment.
Required Disclosure for Each Reportable Segment
At a minimum, the following quantitative information should be presented for each
reportable operating segment identified:
- Revenue from external customers and inter-segment revenue
- Interest revenue and expense
- Depreciation and amortization
- Material non-cash items like impairments
- Share of profit/loss of associates and joint ventures
- Segment assets and liabilities
- Capital additions to non-current segment assets
- Significant non-cash items besides depreciation/amortization
Information disclosed enables users to evaluate nature and financial impacts of activities
within each segment.
Information About Products/Services
Disclosures should present revenues from major products/service lines contributing 10% or
more of total entity revenues. This aids in understanding sources of risks/rewards from key
goods/services.
Geographic Information
If revenues, assets or results depend on economic environments differently, information on
attribution between geographical areas is essential. Format of presentation varies based on
diversity in risk profiles.
Information About Major Customers
Revenues from any single customer exceeding 10% of total entity revenues must be reported
to highlight concentration risks.
Reconciliations of Segment Information
A reconciliation of total reportable segment measures to consolidated amounts in financial
statements should be furnished. Unallocated items comprise head office expenses, financing
gains/losses etc.
Measurement Policies and Inter-Segment Transfers
Consistent measurement policies and elimination approaches followed across segments
should be explained. Basis/method of transfers between segments requires disclosure.
Factors Used by Management to Identify Reportable Segments
Key factors like operating results regularly reviewed by chief executive and segments for
which discrete information is available are presented. This helps understand management
philosophy for segmental evaluation.
Entity-Wide Disclosures
Details on products/services, geographical regions contributing major revenues, exports
across countries etc. help get overarching perspective.
Case Study Disclosing Segments
ABC Ltd manufactures FMCG products. It has two reportable segments - Foods (Revenues
$50 million) and Homecare (Revenues $30 million). Additional information disclosed in
financial statements:
By Product: Breakup of Foods revenues from Snacks 50%, Biscuits 30%,Others 20%
By Geography: Revenues - India $60m, Southeast Asia $15m, Others $5m. Assets - India
$40m, Southeast Asia $12m.
Major Customer: Revenues from XYZ Stores exceed 10% of total at $15 million.
Chief Operating Decision Maker reviews segment profits regularly. Consistent accounting
policies applied. This type of granular disclosure enables users to evaluate risks/prospects
from different lenses.
Conclusion
Identification of operating segments linked with internal management reporting and
consistent quantitative/qualitative disclosures aid stakeholders in comprehending an entity's
diverse activities and associated risks. Segment reporting supplements insights available from
consolidated financial statements. Complying with accounting standards ensures relevance,
transparency and comparability. Overall, the disclosures empower external parties to study
profitability drivers, make projections and efficiently allocate resources.
Segment reporting provides useful information to users of financial statements to better
evaluate past performance and future prospects of a company. It helps identify sources of
risks and opportunities from distinct businesses and operations. International Accounting
Standard (IAS) 14 and Ind AS 108 define an operating segment as a component of an entity
engaged in business activities from which it earns revenue and incurs expenses whose
operating results are regularly reviewed by the entity's chief operating decision maker. This
report discusses key disclosure requirements for reporting operating segments as per
prevalent accounting standards.
Factors Considered for Identifying Operating Segments
Accounting standards provide guidelines on how an entity should identify its operating
segments. Operating segments are generally determined based on:
- Nature of products and services: Segments offering distinct products/services get reported
separately.
- Nature of production processes: Business activities having dissimilar production processes
like mining, manufacturing are separate segments.
- Type/class of customer served: Segments targeting divergent customer types like
business/domestic customers warrant individual disclosure.
- Method of distribution: Segments distributing through unique channels like wholesale/retail
need individual presentation.
- Regulatory environments: Operations in diversified regulatory regimes are reported
independently, say manufacturing/utilities.
Entities aggregate operating segments exhibiting similar long-term economic characteristics,
products/services, customer types etc. into one reportable segment.
Required Disclosure for Each Reportable Segment
At a minimum, the following quantitative information should be presented for each
reportable operating segment identified:
- Revenue from external customers and inter-segment revenue
- Interest revenue and expense
- Depreciation and amortization
- Material non-cash items like impairments
- Share of profit/loss of associates and joint ventures
- Segment assets and liabilities
- Capital additions to non-current segment assets
- Significant non-cash items besides depreciation/amortization
Information disclosed enables users to evaluate nature and financial impacts of activities
within each segment.
Information About Products/Services
Disclosures should present revenues from major products/service lines contributing 10% or
more of total entity revenues. This aids in understanding sources of risks/rewards from key
goods/services.
Geographic Information
If revenues, assets or results depend on economic environments differently, information on
attribution between geographical areas is essential. Format of presentation varies based on
diversity in risk profiles.
Information About Major Customers
Revenues from any single customer exceeding 10% of total entity revenues must be reported
to highlight concentration risks.
Reconciliations of Segment Information
A reconciliation of total reportable segment measures to consolidated amounts in financial
statements should be furnished. Unallocated items comprise head office expenses, financing
gains/losses etc.
Measurement Policies and Inter-Segment Transfers
Consistent measurement policies and elimination approaches followed across segments
should be explained. Basis/method of transfers between segments requires disclosure.
Factors Used by Management to Identify Reportable Segments
Key factors like operating results regularly reviewed by chief executive and segments for
which discrete information is available are presented. This helps understand management
philosophy for segmental evaluation.
Entity-Wide Disclosures
Details on products/services, geographical regions contributing major revenues, exports
across countries etc. help get overarching perspective.
Case Study Disclosing Segments
ABC Ltd manufactures FMCG products. It has two reportable segments - Foods (Revenues
$50 million) and Homecare (Revenues $30 million). Additional information disclosed in
financial statements:
By Product: Breakup of Foods revenues from Snacks 50%, Biscuits 30%,Others 20%
By Geography: Revenues - India $60m, Southeast Asia $15m, Others $5m. Assets - India
$40m, Southeast Asia $12m.
Major Customer: Revenues from XYZ Stores exceed 10% of total at $15 million.
Chief Operating Decision Maker reviews segment profits regularly. Consistent accounting
policies applied. This type of granular disclosure enables users to evaluate risks/prospects
from different lenses.
Conclusion
Identification of operating segments linked with internal management reporting and
consistent quantitative/qualitative disclosures aid stakeholders in comprehending an entity's
diverse activities and associated risks. Segment reporting supplements insights available from
consolidated financial statements. Complying with accounting standards ensures relevance,
transparency and comparability. Overall, the disclosures empower external parties to study
profitability drivers, make projections and efficiently allocate resources.
Segment reporting provides useful information to users of financial statements to better
evaluate past performance and future prospects of a company. It helps identify sources of
risks and opportunities from distinct businesses and operations. International Accounting
Standard (IAS) 14 and Ind AS 108 define an operating segment as a component of an entity
engaged in business activities from which it earns revenue and incurs expenses whose
operating results are regularly reviewed by the entity's chief operating decision maker. This
report discusses key disclosure requirements for reporting operating segments as per
prevalent accounting standards.
Factors Considered for Identifying Operating Segments
Accounting standards provide guidelines on how an entity should identify its operating
segments. Operating segments are generally determined based on:
- Nature of products and services: Segments offering distinct products/services get reported
separately.
- Nature of production processes: Business activities having dissimilar production processes
like mining, manufacturing are separate segments.
- Type/class of customer served: Segments targeting divergent customer types like
business/domestic customers warrant individual disclosure.
- Method of distribution: Segments distributing through unique channels like wholesale/retail
need individual presentation.
- Regulatory environments: Operations in diversified regulatory regimes are reported
independently, say manufacturing/utilities.
Entities aggregate operating segments exhibiting similar long-term economic characteristics,
products/services, customer types etc. into one reportable segment.
Required Disclosure for Each Reportable Segment
At a minimum, the following quantitative information should be presented for each
reportable operating segment identified:
- Revenue from external customers and inter-segment revenue
- Interest revenue and expense
- Depreciation and amortization
- Material non-cash items like impairments
- Share of profit/loss of associates and joint ventures
- Segment assets and liabilities
- Capital additions to non-current segment assets
- Significant non-cash items besides depreciation/amortization
Information disclosed enables users to evaluate nature and financial impacts of activities
within each segment.
Information About Products/Services
Disclosures should present revenues from major products/service lines contributing 10% or
more of total entity revenues. This aids in understanding sources of risks/rewards from key
goods/services.
Geographic Information
If revenues, assets or results depend on economic environments differently, information on
attribution between geographical areas is essential. Format of presentation varies based on
diversity in risk profiles.
Information About Major Customers
Revenues from any single customer exceeding 10% of total entity revenues must be reported
to highlight concentration risks.
Reconciliations of Segment Information
A reconciliation of total reportable segment measures to consolidated amounts in financial
statements should be furnished. Unallocated items comprise head office expenses, financing
gains/losses etc.
Measurement Policies and Inter-Segment Transfers
Consistent measurement policies and elimination approaches followed across segments
should be explained. Basis/method of transfers between segments requires disclosure.
Factors Used by Management to Identify Reportable Segments
Key factors like operating results regularly reviewed by chief executive and segments for
which discrete information is available are presented. This helps understand management
philosophy for segmental evaluation.
Entity-Wide Disclosures
Details on products/services, geographical regions contributing major revenues, exports
across countries etc. help get overarching perspective.
Case Study Disclosing Segments
ABC Ltd manufactures FMCG products. It has two reportable segments - Foods (Revenues
$50 million) and Homecare (Revenues $30 million). Additional information disclosed in
financial statements:
By Product: Breakup of Foods revenues from Snacks 50%, Biscuits 30%,Others 20%
By Geography: Revenues - India $60m, Southeast Asia $15m, Others $5m. Assets - India
$40m, Southeast Asia $12m.
Major Customer: Revenues from XYZ Stores exceed 10% of total at $15 million.
Chief Operating Decision Maker reviews segment profits regularly. Consistent accounting
policies applied. This type of granular disclosure enables users to evaluate risks/prospects
from different lenses.
Conclusion
Identification of operating segments linked with internal management reporting and
consistent quantitative/qualitative disclosures aid stakeholders in comprehending an entity's
diverse activities and associated risks. Segment reporting supplements insights available from
consolidated financial statements. Complying with accounting standards ensures relevance,
transparency and comparability. Overall, the disclosures empower external parties to study
profitability drivers, make projections and efficiently allocate resources.
Segment reporting provides useful information to users of financial statements to better
evaluate past performance and future prospects of a company. It helps identify sources of
risks and opportunities from distinct businesses and operations. International Accounting
Standard (IAS) 14 and Ind AS 108 define an operating segment as a component of an entity
engaged in business activities from which it earns revenue and incurs expenses whose
operating results are regularly reviewed by the entity's chief operating decision maker. This
report discusses key disclosure requirements for reporting operating segments as per
prevalent accounting standards.
Factors Considered for Identifying Operating Segments
Accounting standards provide guidelines on how an entity should identify its operating
segments. Operating segments are generally determined based on:
- Nature of products and services: Segments offering distinct products/services get reported
separately.
- Nature of production processes: Business activities having dissimilar production processes
like mining, manufacturing are separate segments.
- Type/class of customer served: Segments targeting divergent customer types like
business/domestic customers warrant individual disclosure.
- Method of distribution: Segments distributing through unique channels like wholesale/retail
need individual presentation.
- Regulatory environments: Operations in diversified regulatory regimes are reported
independently, say manufacturing/utilities.
Entities aggregate operating segments exhibiting similar long-term economic characteristics,
products/services, customer types etc. into one reportable segment.
Required Disclosure for Each Reportable Segment
At a minimum, the following quantitative information should be presented for each
reportable operating segment identified:
- Revenue from external customers and inter-segment revenue
- Interest revenue and expense
- Depreciation and amortization
- Material non-cash items like impairments
- Share of profit/loss of associates and joint ventures
- Segment assets and liabilities
- Capital additions to non-current segment assets
- Significant non-cash items besides depreciation/amortization
Information disclosed enables users to evaluate nature and financial impacts of activities
within each segment.
Information About Products/Services
Disclosures should present revenues from major products/service lines contributing 10% or
more of total entity revenues. This aids in understanding sources of risks/rewards from key
goods/services.
Geographic Information
If revenues, assets or results depend on economic environments differently, information on
attribution between geographical areas is essential. Format of presentation varies based on
diversity in risk profiles.
Information About Major Customers
Revenues from any single customer exceeding 10% of total entity revenues must be reported
to highlight concentration risks.
Reconciliations of Segment Information
A reconciliation of total reportable segment measures to consolidated amounts in financial
statements should be furnished. Unallocated items comprise head office expenses, financing
gains/losses etc.
Measurement Policies and Inter-Segment Transfers
Consistent measurement policies and elimination approaches followed across segments
should be explained. Basis/method of transfers between segments requires disclosure.
Factors Used by Management to Identify Reportable Segments
Key factors like operating results regularly reviewed by chief executive and segments for
which discrete information is available are presented. This helps understand management
philosophy for segmental evaluation.
Entity-Wide Disclosures
Details on products/services, geographical regions contributing major revenues, exports
across countries etc. help get overarching perspective.
Case Study Disclosing Segments
ABC Ltd manufactures FMCG products. It has two reportable segments - Foods (Revenues
$50 million) and Homecare (Revenues $30 million). Additional information disclosed in
financial statements:
By Product: Breakup of Foods revenues from Snacks 50%, Biscuits 30%,Others 20%
By Geography: Revenues - India $60m, Southeast Asia $15m, Others $5m. Assets - India
$40m, Southeast Asia $12m.
Major Customer: Revenues from XYZ Stores exceed 10% of total at $15 million.
Chief Operating Decision Maker reviews segment profits regularly. Consistent accounting
policies applied. This type of granular disclosure enables users to evaluate risks/prospects
from different lenses.
Conclusion
Identification of operating segments linked with internal management reporting and
consistent quantitative/qualitative disclosures aid stakeholders in comprehending an entity's
diverse activities and associated risks. Segment reporting supplements insights available from
consolidated financial statements. Complying with accounting standards ensures relevance,
transparency and comparability. Overall, the disclosures empower external parties to study
profitability drivers, make projections and efficiently allocate resources.
Segment reporting provides useful information to users of financial statements to better
evaluate past performance and future prospects of a company. It helps identify sources of
risks and opportunities from distinct businesses and operations. International Accounting
Standard (IAS) 14 and Ind AS 108 define an operating segment as a component of an entity
engaged in business activities from which it earns revenue and incurs expenses whose
operating results are regularly reviewed by the entity's chief operating decision maker. This
report discusses key disclosure requirements for reporting operating segments as per
prevalent accounting standards.
Factors Considered for Identifying Operating Segments
Accounting standards provide guidelines on how an entity should identify its operating
segments. Operating segments are generally determined based on:
- Nature of products and services: Segments offering distinct products/services get reported
separately.
- Nature of production processes: Business activities having dissimilar production processes
like mining, manufacturing are separate segments.
- Type/class of customer served: Segments targeting divergent customer types like
business/domestic customers warrant individual disclosure.
- Method of distribution: Segments distributing through unique channels like wholesale/retail
need individual presentation.
- Regulatory environments: Operations in diversified regulatory regimes are reported
independently, say manufacturing/utilities.
Entities aggregate operating segments exhibiting similar long-term economic characteristics,
products/services, customer types etc. into one reportable segment.
Required Disclosure for Each Reportable Segment
At a minimum, the following quantitative information should be presented for each
reportable operating segment identified:
- Revenue from external customers and inter-segment revenue
- Interest revenue and expense
- Depreciation and amortization
- Material non-cash items like impairments
- Share of profit/loss of associates and joint ventures
- Segment assets and liabilities
- Capital additions to non-current segment assets
- Significant non-cash items besides depreciation/amortization
Information disclosed enables users to evaluate nature and financial impacts of activities
within each segment.
Information About Products/Services
Disclosures should present revenues from major products/service lines contributing 10% or
more of total entity revenues. This aids in understanding sources of risks/rewards from key
goods/services.
Geographic Information
If revenues, assets or results depend on economic environments differently, information on
attribution between geographical areas is essential. Format of presentation varies based on
diversity in risk profiles.
Information About Major Customers
Revenues from any single customer exceeding 10% of total entity revenues must be reported
to highlight concentration risks.
Reconciliations of Segment Information
A reconciliation of total reportable segment measures to consolidated amounts in financial
statements should be furnished. Unallocated items comprise head office expenses, financing
gains/losses etc.
Measurement Policies and Inter-Segment Transfers
Consistent measurement policies and elimination approaches followed across segments
should be explained. Basis/method of transfers between segments requires disclosure.
Factors Used by Management to Identify Reportable Segments
Key factors like operating results regularly reviewed by chief executive and segments for
which discrete information is available are presented. This helps understand management
philosophy for segmental evaluation.
Entity-Wide Disclosures
Details on products/services, geographical regions contributing major revenues, exports
across countries etc. help get overarching perspective.
Case Study Disclosing Segments
ABC Ltd manufactures FMCG products. It has two reportable segments - Foods (Revenues
$50 million) and Homecare (Revenues $30 million). Additional information disclosed in
financial statements:
By Product: Breakup of Foods revenues from Snacks 50%, Biscuits 30%,Others 20%
By Geography: Revenues - India $60m, Southeast Asia $15m, Others $5m. Assets - India
$40m, Southeast Asia $12m.
Major Customer: Revenues from XYZ Stores exceed 10% of total at $15 million.
Chief Operating Decision Maker reviews segment profits regularly. Consistent accounting
policies applied. This type of granular disclosure enables users to evaluate risks/prospects
from different lenses.
Conclusion
Identification of operating segments linked with internal management reporting and
consistent quantitative/qualitative disclosures aid stakeholders in comprehending an entity's
diverse activities and associated risks. Segment reporting supplements insights available from
consolidated financial statements. Complying with accounting standards ensures relevance,
transparency and comparability. Overall, the disclosures empower external parties to study
profitability drivers, make projections and efficiently allocate resources.
Segment reporting provides useful information to users of financial statements to better
evaluate past performance and future prospects of a company. It helps identify sources of
risks and opportunities from distinct businesses and operations. International Accounting
Standard (IAS) 14 and Ind AS 108 define an operating segment as a component of an entity
engaged in business activities from which it earns revenue and incurs expenses whose
operating results are regularly reviewed by the entity's chief operating decision maker. This
report discusses key disclosure requirements for reporting operating segments as per
prevalent accounting standards.
Factors Considered for Identifying Operating Segments
Accounting standards provide guidelines on how an entity should identify its operating
segments. Operating segments are generally determined based on:
- Nature of products and services: Segments offering distinct products/services get reported
separately.
- Nature of production processes: Business activities having dissimilar production processes
like mining, manufacturing are separate segments.
- Type/class of customer served: Segments targeting divergent customer types like
business/domestic customers warrant individual disclosure.
- Method of distribution: Segments distributing through unique channels like wholesale/retail
need individual presentation.
- Regulatory environments: Operations in diversified regulatory regimes are reported
independently, say manufacturing/utilities.
Entities aggregate operating segments exhibiting similar long-term economic characteristics,
products/services, customer types etc. into one reportable segment.
Required Disclosure for Each Reportable Segment
At a minimum, the following quantitative information should be presented for each
reportable operating segment identified:
- Revenue from external customers and inter-segment revenue
- Interest revenue and expense
- Depreciation and amortization
- Material non-cash items like impairments
- Share of profit/loss of associates and joint ventures
- Segment assets and liabilities
- Capital additions to non-current segment assets
- Significant non-cash items besides depreciation/amortization
Information disclosed enables users to evaluate nature and financial impacts of activities
within each segment.
Information About Products/Services
Disclosures should present revenues from major products/service lines contributing 10% or
more of total entity revenues. This aids in understanding sources of risks/rewards from key
goods/services.
Geographic Information
If revenues, assets or results depend on economic environments differently, information on
attribution between geographical areas is essential. Format of presentation varies based on
diversity in risk profiles.
Information About Major Customers
Revenues from any single customer exceeding 10% of total entity revenues must be reported
to highlight concentration risks.
Reconciliations of Segment Information
A reconciliation of total reportable segment measures to consolidated amounts in financial
statements should be furnished. Unallocated items comprise head office expenses, financing
gains/losses etc.
Measurement Policies and Inter-Segment Transfers
Consistent measurement policies and elimination approaches followed across segments
should be explained. Basis/method of transfers between segments requires disclosure.
Factors Used by Management to Identify Reportable Segments
Key factors like operating results regularly reviewed by chief executive and segments for
which discrete information is available are presented. This helps understand management
philosophy for segmental evaluation.
Entity-Wide Disclosures
Details on products/services, geographical regions contributing major revenues, exports
across countries etc. help get overarching perspective.
Case Study Disclosing Segments
ABC Ltd manufactures FMCG products. It has two reportable segments - Foods (Revenues
$50 million) and Homecare (Revenues $30 million). Additional information disclosed in
financial statements:
By Product: Breakup of Foods revenues from Snacks 50%, Biscuits 30%,Others 20%
By Geography: Revenues - India $60m, Southeast Asia $15m, Others $5m. Assets - India
$40m, Southeast Asia $12m.
Major Customer: Revenues from XYZ Stores exceed 10% of total at $15 million.
Chief Operating Decision Maker reviews segment profits regularly. Consistent accounting
policies applied. This type of granular disclosure enables users to evaluate risks/prospects
from different lenses.
Conclusion
Identification of operating segments linked with internal management reporting and
consistent quantitative/qualitative disclosures aid stakeholders in comprehending an entity's
diverse activities and associated risks. Segment reporting supplements insights available from
consolidated financial statements. Complying with accounting standards ensures relevance,
transparency and comparability. Overall, the disclosures empower external parties to study
profitability drivers, make projections and efficiently allocate resources.
Segment reporting provides useful information to users of financial statements to better
evaluate past performance and future prospects of a company. It helps identify sources of
risks and opportunities from distinct businesses and operations. International Accounting
Standard (IAS) 14 and Ind AS 108 define an operating segment as a component of an entity
engaged in business activities from which it earns revenue and incurs expenses whose
operating results are regularly reviewed by the entity's chief operating decision maker. This
report discusses key disclosure requirements for reporting operating segments as per
prevalent accounting standards.
Factors Considered for Identifying Operating Segments
Accounting standards provide guidelines on how an entity should identify its operating
segments. Operating segments are generally determined based on:
- Nature of products and services: Segments offering distinct products/services get reported
separately.
- Nature of production processes: Business activities having dissimilar production processes
like mining, manufacturing are separate segments.
- Type/class of customer served: Segments targeting divergent customer types like
business/domestic customers warrant individual disclosure.
- Method of distribution: Segments distributing through unique channels like wholesale/retail
need individual presentation.
- Regulatory environments: Operations in diversified regulatory regimes are reported
independently, say manufacturing/utilities.
Entities aggregate operating segments exhibiting similar long-term economic characteristics,
products/services, customer types etc. into one reportable segment.
Required Disclosure for Each Reportable Segment
At a minimum, the following quantitative information should be presented for each
reportable operating segment identified:
- Revenue from external customers and inter-segment revenue
- Interest revenue and expense
- Depreciation and amortization
- Material non-cash items like impairments
- Share of profit/loss of associates and joint ventures
- Segment assets and liabilities
- Capital additions to non-current segment assets
- Significant non-cash items besides depreciation/amortization
Information disclosed enables users to evaluate nature and financial impacts of activities
within each segment.
Information About Products/Services
Disclosures should present revenues from major products/service lines contributing 10% or
more of total entity revenues. This aids in understanding sources of risks/rewards from key
goods/services.
Geographic Information
If revenues, assets or results depend on economic environments differently, information on
attribution between geographical areas is essential. Format of presentation varies based on
diversity in risk profiles.
Information About Major Customers
Revenues from any single customer exceeding 10% of total entity revenues must be reported
to highlight concentration risks.
Reconciliations of Segment Information
A reconciliation of total reportable segment measures to consolidated amounts in financial
statements should be furnished. Unallocated items comprise head office expenses, financing
gains/losses etc.
Measurement Policies and Inter-Segment Transfers
Consistent measurement policies and elimination approaches followed across segments
should be explained. Basis/method of transfers between segments requires disclosure.
Factors Used by Management to Identify Reportable Segments
Key factors like operating results regularly reviewed by chief executive and segments for
which discrete information is available are presented. This helps understand management
philosophy for segmental evaluation.
Entity-Wide Disclosures
Details on products/services, geographical regions contributing major revenues, exports
across countries etc. help get overarching perspective.
Case Study Disclosing Segments
ABC Ltd manufactures FMCG products. It has two reportable segments - Foods (Revenues
$50 million) and Homecare (Revenues $30 million). Additional information disclosed in
financial statements:
By Product: Breakup of Foods revenues from Snacks 50%, Biscuits 30%,Others 20%
By Geography: Revenues - India $60m, Southeast Asia $15m, Others $5m. Assets - India
$40m, Southeast Asia $12m.
Major Customer: Revenues from XYZ Stores exceed 10% of total at $15 million.
Chief Operating Decision Maker reviews segment profits regularly. Consistent accounting
policies applied. This type of granular disclosure enables users to evaluate risks/prospects
from different lenses.
Conclusion
Identification of operating segments linked with internal management reporting and
consistent quantitative/qualitative disclosures aid stakeholders in comprehending an entity's
diverse activities and associated risks. Segment reporting supplements insights available from
consolidated financial statements. Complying with accounting standards ensures relevance,
transparency and comparability. Overall, the disclosures empower external parties to study
profitability drivers, make projections and efficiently allocate resources.
Segment reporting provides useful information to users of financial statements to better
evaluate past performance and future prospects of a company. It helps identify sources of
risks and opportunities from distinct businesses and operations. International Accounting
Standard (IAS) 14 and Ind AS 108 define an operating segment as a component of an entity
engaged in business activities from which it earns revenue and incurs expenses whose
operating results are regularly reviewed by the entity's chief operating decision maker. This
report discusses key disclosure requirements for reporting operating segments as per
prevalent accounting standards.
Factors Considered for Identifying Operating Segments
Accounting standards provide guidelines on how an entity should identify its operating
segments. Operating segments are generally determined based on:
- Nature of products and services: Segments offering distinct products/services get reported
separately.
- Nature of production processes: Business activities having dissimilar production processes
like mining, manufacturing are separate segments.
- Type/class of customer served: Segments targeting divergent customer types like
business/domestic customers warrant individual disclosure.
- Method of distribution: Segments distributing through unique channels like wholesale/retail
need individual presentation.
- Regulatory environments: Operations in diversified regulatory regimes are reported
independently, say manufacturing/utilities.
Entities aggregate operating segments exhibiting similar long-term economic characteristics,
products/services, customer types etc. into one reportable segment.
Required Disclosure for Each Reportable Segment
At a minimum, the following quantitative information should be presented for each
reportable operating segment identified:
- Revenue from external customers and inter-segment revenue
- Interest revenue and expense
- Depreciation and amortization
- Material non-cash items like impairments
- Share of profit/loss of associates and joint ventures
- Segment assets and liabilities
- Capital additions to non-current segment assets
- Significant non-cash items besides depreciation/amortization
Information disclosed enables users to evaluate nature and financial impacts of activities
within each segment.
Information About Products/Services
Disclosures should present revenues from major products/service lines contributing 10% or
more of total entity revenues. This aids in understanding sources of risks/rewards from key
goods/services.
Geographic Information
If revenues, assets or results depend on economic environments differently, information on
attribution between geographical areas is essential. Format of presentation varies based on
diversity in risk profiles.
Information About Major Customers
Revenues from any single customer exceeding 10% of total entity revenues must be reported
to highlight concentration risks.
Reconciliations of Segment Information
A reconciliation of total reportable segment measures to consolidated amounts in financial
statements should be furnished. Unallocated items comprise head office expenses, financing
gains/losses etc.
Measurement Policies and Inter-Segment Transfers
Consistent measurement policies and elimination approaches followed across segments
should be explained. Basis/method of transfers between segments requires disclosure.
Factors Used by Management to Identify Reportable Segments
Key factors like operating results regularly reviewed by chief executive and segments for
which discrete information is available are presented. This helps understand management
philosophy for segmental evaluation.
Entity-Wide Disclosures
Details on products/services, geographical regions contributing major revenues, exports
across countries etc. help get overarching perspective.
Case Study Disclosing Segments
ABC Ltd manufactures FMCG products. It has two reportable segments - Foods (Revenues
$50 million) and Homecare (Revenues $30 million). Additional information disclosed in
financial statements:
By Product: Breakup of Foods revenues from Snacks 50%, Biscuits 30%,Others 20%
By Geography: Revenues - India $60m, Southeast Asia $15m, Others $5m. Assets - India
$40m, Southeast Asia $12m.
Major Customer: Revenues from XYZ Stores exceed 10% of total at $15 million.
Chief Operating Decision Maker reviews segment profits regularly. Consistent accounting
policies applied. This type of granular disclosure enables users to evaluate risks/prospects
from different lenses.
Conclusion
Identification of operating segments linked with internal management reporting and
consistent quantitative/qualitative disclosures aid stakeholders in comprehending an entity's
diverse activities and associated risks. Segment reporting supplements insights available from
consolidated financial statements. Complying with accounting standards ensures relevance,
transparency and comparability. Overall, the disclosures empower external parties to study
profitability drivers, make projections and efficiently allocate resources.
Segment reporting provides useful information to users of financial statements to better
evaluate past performance and future prospects of a company. It helps identify sources of
risks and opportunities from distinct businesses and operations. International Accounting
Standard (IAS) 14 and Ind AS 108 define an operating segment as a component of an entity
engaged in business activities from which it earns revenue and incurs expenses whose
operating results are regularly reviewed by the entity's chief operating decision maker. This
report discusses key disclosure requirements for reporting operating segments as per
prevalent accounting standards.
Factors Considered for Identifying Operating Segments
Accounting standards provide guidelines on how an entity should identify its operating
segments. Operating segments are generally determined based on:
- Nature of products and services: Segments offering distinct products/services get reported
separately.
- Nature of production processes: Business activities having dissimilar production processes
like mining, manufacturing are separate segments.
- Type/class of customer served: Segments targeting divergent customer types like
business/domestic customers warrant individual disclosure.
- Method of distribution: Segments distributing through unique channels like wholesale/retail
need individual presentation.
- Regulatory environments: Operations in diversified regulatory regimes are reported
independently, say manufacturing/utilities.
Entities aggregate operating segments exhibiting similar long-term economic characteristics,
products/services, customer types etc. into one reportable segment.
Required Disclosure for Each Reportable Segment
At a minimum, the following quantitative information should be presented for each
reportable operating segment identified:
- Revenue from external customers and inter-segment revenue
- Interest revenue and expense
- Depreciation and amortization
- Material non-cash items like impairments
- Share of profit/loss of associates and joint ventures
- Segment assets and liabilities
- Capital additions to non-current segment assets
- Significant non-cash items besides depreciation/amortization
Information disclosed enables users to evaluate nature and financial impacts of activities
within each segment.
Information About Products/Services
Disclosures should present revenues from major products/service lines contributing 10% or
more of total entity revenues. This aids in understanding sources of risks/rewards from key
goods/services.
Geographic Information
If revenues, assets or results depend on economic environments differently, information on
attribution between geographical areas is essential. Format of presentation varies based on
diversity in risk profiles.
Information About Major Customers
Revenues from any single customer exceeding 10% of total entity revenues must be reported
to highlight concentration risks.
Reconciliations of Segment Information
A reconciliation of total reportable segment measures to consolidated amounts in financial
statements should be furnished. Unallocated items comprise head office expenses, financing
gains/losses etc.
Measurement Policies and Inter-Segment Transfers
Consistent measurement policies and elimination approaches followed across segments
should be explained. Basis/method of transfers between segments requires disclosure.
Factors Used by Management to Identify Reportable Segments
Key factors like operating results regularly reviewed by chief executive and segments for
which discrete information is available are presented. This helps understand management
philosophy for segmental evaluation.
Entity-Wide Disclosures
Details on products/services, geographical regions contributing major revenues, exports
across countries etc. help get overarching perspective.
Case Study Disclosing Segments
ABC Ltd manufactures FMCG products. It has two reportable segments - Foods (Revenues
$50 million) and Homecare (Revenues $30 million). Additional information disclosed in
financial statements:
By Product: Breakup of Foods revenues from Snacks 50%, Biscuits 30%,Others 20%
By Geography: Revenues - India $60m, Southeast Asia $15m, Others $5m. Assets - India
$40m, Southeast Asia $12m.
Major Customer: Revenues from XYZ Stores exceed 10% of total at $15 million.
Chief Operating Decision Maker reviews segment profits regularly. Consistent accounting
policies applied. This type of granular disclosure enables users to evaluate risks/prospects
from different lenses.
Conclusion
Identification of operating segments linked with internal management reporting and
consistent quantitative/qualitative disclosures aid stakeholders in comprehending an entity's
diverse activities and associated risks. Segment reporting supplements insights available from
consolidated financial statements. Complying with accounting standards ensures relevance,
transparency and comparability. Overall, the disclosures empower external parties to study
profitability drivers, make projections and efficiently allocate resources.
Segment reporting provides useful information to users of financial statements to better
evaluate past performance and future prospects of a company. It helps identify sources of
risks and opportunities from distinct businesses and operations. International Accounting
Standard (IAS) 14 and Ind AS 108 define an operating segment as a component of an entity
engaged in business activities from which it earns revenue and incurs expenses whose
operating results are regularly reviewed by the entity's chief operating decision maker. This
report discusses key disclosure requirements for reporting operating segments as per
prevalent accounting standards.
Factors Considered for Identifying Operating Segments
Accounting standards provide guidelines on how an entity should identify its operating
segments. Operating segments are generally determined based on:
- Nature of products and services: Segments offering distinct products/services get reported
separately.
- Nature of production processes: Business activities having dissimilar production processes
like mining, manufacturing are separate segments.
- Type/class of customer served: Segments targeting divergent customer types like
business/domestic customers warrant individual disclosure.
- Method of distribution: Segments distributing through unique channels like wholesale/retail
need individual presentation.
- Regulatory environments: Operations in diversified regulatory regimes are reported
independently, say manufacturing/utilities.
Entities aggregate operating segments exhibiting similar long-term economic characteristics,
products/services, customer types etc. into one reportable segment.
Required Disclosure for Each Reportable Segment
At a minimum, the following quantitative information should be presented for each
reportable operating segment identified:
- Revenue from external customers and inter-segment revenue
- Interest revenue and expense
- Depreciation and amortization
- Material non-cash items like impairments
- Share of profit/loss of associates and joint ventures
- Segment assets and liabilities
- Capital additions to non-current segment assets
- Significant non-cash items besides depreciation/amortization
Information disclosed enables users to evaluate nature and financial impacts of activities
within each segment.
Information About Products/Services
Disclosures should present revenues from major products/service lines contributing 10% or
more of total entity revenues. This aids in understanding sources of risks/rewards from key
goods/services.
Geographic Information
If revenues, assets or results depend on economic environments differently, information on
attribution between geographical areas is essential. Format of presentation varies based on
diversity in risk profiles.
Information About Major Customers
Revenues from any single customer exceeding 10% of total entity revenues must be reported
to highlight concentration risks.
Reconciliations of Segment Information
A reconciliation of total reportable segment measures to consolidated amounts in financial
statements should be furnished. Unallocated items comprise head office expenses, financing
gains/losses etc.
Measurement Policies and Inter-Segment Transfers
Consistent measurement policies and elimination approaches followed across segments
should be explained. Basis/method of transfers between segments requires disclosure.
Factors Used by Management to Identify Reportable Segments
Key factors like operating results regularly reviewed by chief executive and segments for
which discrete information is available are presented. This helps understand management
philosophy for segmental evaluation.
Entity-Wide Disclosures
Details on products/services, geographical regions contributing major revenues, exports
across countries etc. help get overarching perspective.
Case Study Disclosing Segments
ABC Ltd manufactures FMCG products. It has two reportable segments - Foods (Revenues
$50 million) and Homecare (Revenues $30 million). Additional information disclosed in
financial statements:
By Product: Breakup of Foods revenues from Snacks 50%, Biscuits 30%,Others 20%
By Geography: Revenues - India $60m, Southeast Asia $15m, Others $5m. Assets - India
$40m, Southeast Asia $12m.
Major Customer: Revenues from XYZ Stores exceed 10% of total at $15 million.
Chief Operating Decision Maker reviews segment profits regularly. Consistent accounting
policies applied. This type of granular disclosure enables users to evaluate risks/prospects
from different lenses.
Conclusion
Identification of operating segments linked with internal management reporting and
consistent quantitative/qualitative disclosures aid stakeholders in comprehending an entity's
diverse activities and associated risks. Segment reporting supplements insights available from
consolidated financial statements. Complying with accounting standards ensures relevance,
transparency and comparability. Overall, the disclosures empower external parties to study
profitability drivers, make projections and efficiently allocate resources.
Segment reporting provides useful information to users of financial statements to better
evaluate past performance and future prospects of a company. It helps identify sources of
risks and opportunities from distinct businesses and operations. International Accounting
Standard (IAS) 14 and Ind AS 108 define an operating segment as a component of an entity
engaged in business activities from which it earns revenue and incurs expenses whose
operating results are regularly reviewed by the entity's chief operating decision maker. This
report discusses key disclosure requirements for reporting operating segments as per
prevalent accounting standards.
Factors Considered for Identifying Operating Segments
Accounting standards provide guidelines on how an entity should identify its operating
segments. Operating segments are generally determined based on:
- Nature of products and services: Segments offering distinct products/services get reported
separately.
- Nature of production processes: Business activities having dissimilar production processes
like mining, manufacturing are separate segments.
- Type/class of customer served: Segments targeting divergent customer types like
business/domestic customers warrant individual disclosure.
- Method of distribution: Segments distributing through unique channels like wholesale/retail
need individual presentation.
- Regulatory environments: Operations in diversified regulatory regimes are reported
independently, say manufacturing/utilities.
Entities aggregate operating segments exhibiting similar long-term economic characteristics,
products/services, customer types etc. into one reportable segment.
Required Disclosure for Each Reportable Segment
At a minimum, the following quantitative information should be presented for each
reportable operating segment identified:
- Revenue from external customers and inter-segment revenue
- Interest revenue and expense
- Depreciation and amortization
- Material non-cash items like impairments
- Share of profit/loss of associates and joint ventures
- Segment assets and liabilities
- Capital additions to non-current segment assets
- Significant non-cash items besides depreciation/amortization
Information disclosed enables users to evaluate nature and financial impacts of activities
within each segment.
Information About Products/Services
Disclosures should present revenues from major products/service lines contributing 10% or
more of total entity revenues. This aids in understanding sources of risks/rewards from key
goods/services.
Geographic Information
If revenues, assets or results depend on economic environments differently, information on
attribution between geographical areas is essential. Format of presentation varies based on
diversity in risk profiles.
Information About Major Customers
Revenues from any single customer exceeding 10% of total entity revenues must be reported
to highlight concentration risks.
Reconciliations of Segment Information
A reconciliation of total reportable segment measures to consolidated amounts in financial
statements should be furnished. Unallocated items comprise head office expenses, financing
gains/losses etc.
Measurement Policies and Inter-Segment Transfers
Consistent measurement policies and elimination approaches followed across segments
should be explained. Basis/method of transfers between segments requires disclosure.
Factors Used by Management to Identify Reportable Segments
Key factors like operating results regularly reviewed by chief executive and segments for
which discrete information is available are presented. This helps understand management
philosophy for segmental evaluation.
Entity-Wide Disclosures
Details on products/services, geographical regions contributing major revenues, exports
across countries etc. help get overarching perspective.
Case Study Disclosing Segments
ABC Ltd manufactures FMCG products. It has two reportable segments - Foods (Revenues
$50 million) and Homecare (Revenues $30 million). Additional information disclosed in
financial statements:
By Product: Breakup of Foods revenues from Snacks 50%, Biscuits 30%,Others 20%
By Geography: Revenues - India $60m, Southeast Asia $15m, Others $5m. Assets - India
$40m, Southeast Asia $12m.
Major Customer: Revenues from XYZ Stores exceed 10% of total at $15 million.
Chief Operating Decision Maker reviews segment profits regularly. Consistent accounting
policies applied. This type of granular disclosure enables users to evaluate risks/prospects
from different lenses.
Conclusion
Identification of operating segments linked with internal management reporting and
consistent quantitative/qualitative disclosures aid stakeholders in comprehending an entity's
diverse activities and associated risks. Segment reporting supplements insights available from
consolidated financial statements. Complying with accounting standards ensures relevance,
transparency and comparability. Overall, the disclosures empower external parties to study
profitability drivers, make projections and efficiently allocate resources.
Segment reporting provides useful information to users of financial statements to better
evaluate past performance and future prospects of a company. It helps identify sources of
risks and opportunities from distinct businesses and operations. International Accounting
Standard (IAS) 14 and Ind AS 108 define an operating segment as a component of an entity
engaged in business activities from which it earns revenue and incurs expenses whose
operating results are regularly reviewed by the entity's chief operating decision maker. This
report discusses key disclosure requirements for reporting operating segments as per
prevalent accounting standards.
Factors Considered for Identifying Operating Segments
Accounting standards provide guidelines on how an entity should identify its operating
segments. Operating segments are generally determined based on:
- Nature of products and services: Segments offering distinct products/services get reported
separately.
- Nature of production processes: Business activities having dissimilar production processes
like mining, manufacturing are separate segments.
- Type/class of customer served: Segments targeting divergent customer types like
business/domestic customers warrant individual disclosure.
- Method of distribution: Segments distributing through unique channels like wholesale/retail
need individual presentation.
- Regulatory environments: Operations in diversified regulatory regimes are reported
independently, say manufacturing/utilities.
Entities aggregate operating segments exhibiting similar long-term economic characteristics,
products/services, customer types etc. into one reportable segment.
Required Disclosure for Each Reportable Segment
At a minimum, the following quantitative information should be presented for each
reportable operating segment identified:
- Revenue from external customers and inter-segment revenue
- Interest revenue and expense
- Depreciation and amortization
- Material non-cash items like impairments
- Share of profit/loss of associates and joint ventures
- Segment assets and liabilities
- Capital additions to non-current segment assets
- Significant non-cash items besides depreciation/amortization
Information disclosed enables users to evaluate nature and financial impacts of activities
within each segment.
Information About Products/Services
Disclosures should present revenues from major products/service lines contributing 10% or
more of total entity revenues. This aids in understanding sources of risks/rewards from key
goods/services.
Geographic Information
If revenues, assets or results depend on economic environments differently, information on
attribution between geographical areas is essential. Format of presentation varies based on
diversity in risk profiles.
Information About Major Customers
Revenues from any single customer exceeding 10% of total entity revenues must be reported
to highlight concentration risks.
Reconciliations of Segment Information
A reconciliation of total reportable segment measures to consolidated amounts in financial
statements should be furnished. Unallocated items comprise head office expenses, financing
gains/losses etc.
Measurement Policies and Inter-Segment Transfers
Consistent measurement policies and elimination approaches followed across segments
should be explained. Basis/method of transfers between segments requires disclosure.
Factors Used by Management to Identify Reportable Segments
Key factors like operating results regularly reviewed by chief executive and segments for
which discrete information is available are presented. This helps understand management
philosophy for segmental evaluation.
Entity-Wide Disclosures
Details on products/services, geographical regions contributing major revenues, exports
across countries etc. help get overarching perspective.
Case Study Disclosing Segments
ABC Ltd manufactures FMCG products. It has two reportable segments - Foods (Revenues
$50 million) and Homecare (Revenues $30 million). Additional information disclosed in
financial statements:
By Product: Breakup of Foods revenues from Snacks 50%, Biscuits 30%,Others 20%
By Geography: Revenues - India $60m, Southeast Asia $15m, Others $5m. Assets - India
$40m, Southeast Asia $12m.
Major Customer: Revenues from XYZ Stores exceed 10% of total at $15 million.
Chief Operating Decision Maker reviews segment profits regularly. Consistent accounting
policies applied. This type of granular disclosure enables users to evaluate risks/prospects
from different lenses.
Conclusion
Identification of operating segments linked with internal management reporting and
consistent quantitative/qualitative disclosures aid stakeholders in comprehending an entity's
diverse activities and associated risks. Segment reporting supplements insights available from
consolidated financial statements. Complying with accounting standards ensures relevance,
transparency and comparability. Overall, the disclosures empower external parties to study
profitability drivers, make projections and efficiently allocate resources.
Segment reporting provides useful information to users of financial statements to better
evaluate past performance and future prospects of a company. It helps identify sources of
risks and opportunities from distinct businesses and operations. International Accounting
Standard (IAS) 14 and Ind AS 108 define an operating segment as a component of an entity
engaged in business activities from which it earns revenue and incurs expenses whose
operating results are regularly reviewed by the entity's chief operating decision maker. This
report discusses key disclosure requirements for reporting operating segments as per
prevalent accounting standards.
Factors Considered for Identifying Operating Segments
Accounting standards provide guidelines on how an entity should identify its operating
segments. Operating segments are generally determined based on:
- Nature of products and services: Segments offering distinct products/services get reported
separately.
- Nature of production processes: Business activities having dissimilar production processes
like mining, manufacturing are separate segments.
- Type/class of customer served: Segments targeting divergent customer types like
business/domestic customers warrant individual disclosure.
- Method of distribution: Segments distributing through unique channels like wholesale/retail
need individual presentation.
- Regulatory environments: Operations in diversified regulatory regimes are reported
independently, say manufacturing/utilities.
Entities aggregate operating segments exhibiting similar long-term economic characteristics,
products/services, customer types etc. into one reportable segment.
Required Disclosure for Each Reportable Segment
At a minimum, the following quantitative information should be presented for each
reportable operating segment identified:
- Revenue from external customers and inter-segment revenue
- Interest revenue and expense
- Depreciation and amortization
- Material non-cash items like impairments
- Share of profit/loss of associates and joint ventures
- Segment assets and liabilities
- Capital additions to non-current segment assets
- Significant non-cash items besides depreciation/amortization
Information disclosed enables users to evaluate nature and financial impacts of activities
within each segment.
Information About Products/Services
Disclosures should present revenues from major products/service lines contributing 10% or
more of total entity revenues. This aids in understanding sources of risks/rewards from key
goods/services.
Geographic Information
If revenues, assets or results depend on economic environments differently, information on
attribution between geographical areas is essential. Format of presentation varies based on
diversity in risk profiles.
Information About Major Customers
Revenues from any single customer exceeding 10% of total entity revenues must be reported
to highlight concentration risks.
Reconciliations of Segment Information
A reconciliation of total reportable segment measures to consolidated amounts in financial
statements should be furnished. Unallocated items comprise head office expenses, financing
gains/losses etc.
Measurement Policies and Inter-Segment Transfers
Consistent measurement policies and elimination approaches followed across segments
should be explained. Basis/method of transfers between segments requires disclosure.
Factors Used by Management to Identify Reportable Segments
Key factors like operating results regularly reviewed by chief executive and segments for
which discrete information is available are presented. This helps understand management
philosophy for segmental evaluation.
Entity-Wide Disclosures
Details on products/services, geographical regions contributing major revenues, exports
across countries etc. help get overarching perspective.
Case Study Disclosing Segments
ABC Ltd manufactures FMCG products. It has two reportable segments - Foods (Revenues
$50 million) and Homecare (Revenues $30 million). Additional information disclosed in
financial statements:
By Product: Breakup of Foods revenues from Snacks 50%, Biscuits 30%,Others 20%
By Geography: Revenues - India $60m, Southeast Asia $15m, Others $5m. Assets - India
$40m, Southeast Asia $12m.
Major Customer: Revenues from XYZ Stores exceed 10% of total at $15 million.
Chief Operating Decision Maker reviews segment profits regularly. Consistent accounting
policies applied. This type of granular disclosure enables users to evaluate risks/prospects
from different lenses.
Conclusion
Identification of operating segments linked with internal management reporting and
consistent quantitative/qualitative disclosures aid stakeholders in comprehending an entity's
diverse activities and associated risks. Segment reporting supplements insights available from
consolidated financial statements. Complying with accounting standards ensures relevance,
transparency and comparability. Overall, the disclosures empower external parties to study
profitability drivers, make projections and efficiently allocate resources.
Segment reporting provides useful information to users of financial statements to better
evaluate past performance and future prospects of a company. It helps identify sources of
risks and opportunities from distinct businesses and operations. International Accounting
Standard (IAS) 14 and Ind AS 108 define an operating segment as a component of an entity
engaged in business activities from which it earns revenue and incurs expenses whose
operating results are regularly reviewed by the entity's chief operating decision maker. This
report discusses key disclosure requirements for reporting operating segments as per
prevalent accounting standards.
Factors Considered for Identifying Operating Segments
Accounting standards provide guidelines on how an entity should identify its operating
segments. Operating segments are generally determined based on:
- Nature of products and services: Segments offering distinct products/services get reported
separately.
- Nature of production processes: Business activities having dissimilar production processes
like mining, manufacturing are separate segments.
- Type/class of customer served: Segments targeting divergent customer types like
business/domestic customers warrant individual disclosure.
- Method of distribution: Segments distributing through unique channels like wholesale/retail
need individual presentation.
- Regulatory environments: Operations in diversified regulatory regimes are reported
independently, say manufacturing/utilities.
Entities aggregate operating segments exhibiting similar long-term economic characteristics,
products/services, customer types etc. into one reportable segment.
Required Disclosure for Each Reportable Segment
At a minimum, the following quantitative information should be presented for each
reportable operating segment identified:
- Revenue from external customers and inter-segment revenue
- Interest revenue and expense
- Depreciation and amortization
- Material non-cash items like impairments
- Share of profit/loss of associates and joint ventures
- Segment assets and liabilities
- Capital additions to non-current segment assets
- Significant non-cash items besides depreciation/amortization
Information disclosed enables users to evaluate nature and financial impacts of activities
within each segment.
Information About Products/Services
Disclosures should present revenues from major products/service lines contributing 10% or
more of total entity revenues. This aids in understanding sources of risks/rewards from key
goods/services.
Geographic Information
If revenues, assets or results depend on economic environments differently, information on
attribution between geographical areas is essential. Format of presentation varies based on
diversity in risk profiles.
Information About Major Customers
Revenues from any single customer exceeding 10% of total entity revenues must be reported
to highlight concentration risks.
Reconciliations of Segment Information
A reconciliation of total reportable segment measures to consolidated amounts in financial
statements should be furnished. Unallocated items comprise head office expenses, financing
gains/losses etc.
Measurement Policies and Inter-Segment Transfers
Consistent measurement policies and elimination approaches followed across segments
should be explained. Basis/method of transfers between segments requires disclosure.
Factors Used by Management to Identify Reportable Segments
Key factors like operating results regularly reviewed by chief executive and segments for
which discrete information is available are presented. This helps understand management
philosophy for segmental evaluation.
Entity-Wide Disclosures
Details on products/services, geographical regions contributing major revenues, exports
across countries etc. help get overarching perspective.
Case Study Disclosing Segments
ABC Ltd manufactures FMCG products. It has two reportable segments - Foods (Revenues
$50 million) and Homecare (Revenues $30 million). Additional information disclosed in
financial statements:
By Product: Breakup of Foods revenues from Snacks 50%, Biscuits 30%,Others 20%
By Geography: Revenues - India $60m, Southeast Asia $15m, Others $5m. Assets - India
$40m, Southeast Asia $12m.
Major Customer: Revenues from XYZ Stores exceed 10% of total at $15 million.
Chief Operating Decision Maker reviews segment profits regularly. Consistent accounting
policies applied. This type of granular disclosure enables users to evaluate risks/prospects
from different lenses.
Conclusion
Identification of operating segments linked with internal management reporting and
consistent quantitative/qualitative disclosures aid stakeholders in comprehending an entity's
diverse activities and associated risks. Segment reporting supplements insights available from
consolidated financial statements. Complying with accounting standards ensures relevance,
transparency and comparability. Overall, the disclosures empower external parties to study
profitability drivers, make projections and efficiently allocate resources.
Segment reporting provides useful information to users of financial statements to better
evaluate past performance and future prospects of a company. It helps identify sources of
risks and opportunities from distinct businesses and operations. International Accounting
Standard (IAS) 14 and Ind AS 108 define an operating segment as a component of an entity
engaged in business activities from which it earns revenue and incurs expenses whose
operating results are regularly reviewed by the entity's chief operating decision maker. This
report discusses key disclosure requirements for reporting operating segments as per
prevalent accounting standards.
Factors Considered for Identifying Operating Segments
Accounting standards provide guidelines on how an entity should identify its operating
segments. Operating segments are generally determined based on:
- Nature of products and services: Segments offering distinct products/services get reported
separately.
- Nature of production processes: Business activities having dissimilar production processes
like mining, manufacturing are separate segments.
- Type/class of customer served: Segments targeting divergent customer types like
business/domestic customers warrant individual disclosure.
- Method of distribution: Segments distributing through unique channels like wholesale/retail
need individual presentation.
- Regulatory environments: Operations in diversified regulatory regimes are reported
independently, say manufacturing/utilities.
Entities aggregate operating segments exhibiting similar long-term economic characteristics,
products/services, customer types etc. into one reportable segment.
Required Disclosure for Each Reportable Segment
At a minimum, the following quantitative information should be presented for each
reportable operating segment identified:
- Revenue from external customers and inter-segment revenue
- Interest revenue and expense
- Depreciation and amortization
- Material non-cash items like impairments
- Share of profit/loss of associates and joint ventures
- Segment assets and liabilities
- Capital additions to non-current segment assets
- Significant non-cash items besides depreciation/amortization
Information disclosed enables users to evaluate nature and financial impacts of activities
within each segment.
Information About Products/Services
Disclosures should present revenues from major products/service lines contributing 10% or
more of total entity revenues. This aids in understanding sources of risks/rewards from key
goods/services.
Geographic Information
If revenues, assets or results depend on economic environments differently, information on
attribution between geographical areas is essential. Format of presentation varies based on
diversity in risk profiles.
Information About Major Customers
Revenues from any single customer exceeding 10% of total entity revenues must be reported
to highlight concentration risks.
Reconciliations of Segment Information
A reconciliation of total reportable segment measures to consolidated amounts in financial
statements should be furnished. Unallocated items comprise head office expenses, financing
gains/losses etc.
Measurement Policies and Inter-Segment Transfers
Consistent measurement policies and elimination approaches followed across segments
should be explained. Basis/method of transfers between segments requires disclosure.
Factors Used by Management to Identify Reportable Segments
Key factors like operating results regularly reviewed by chief executive and segments for
which discrete information is available are presented. This helps understand management
philosophy for segmental evaluation.
Entity-Wide Disclosures
Details on products/services, geographical regions contributing major revenues, exports
across countries etc. help get overarching perspective.
Case Study Disclosing Segments
ABC Ltd manufactures FMCG products. It has two reportable segments - Foods (Revenues
$50 million) and Homecare (Revenues $30 million). Additional information disclosed in
financial statements:
By Product: Breakup of Foods revenues from Snacks 50%, Biscuits 30%,Others 20%
By Geography: Revenues - India $60m, Southeast Asia $15m, Others $5m. Assets - India
$40m, Southeast Asia $12m.
Major Customer: Revenues from XYZ Stores exceed 10% of total at $15 million.
Chief Operating Decision Maker reviews segment profits regularly. Consistent accounting
policies applied. This type of granular disclosure enables users to evaluate risks/prospects
from different lenses.
Conclusion
Identification of operating segments linked with internal management reporting and
consistent quantitative/qualitative disclosures aid stakeholders in comprehending an entity's
diverse activities and associated risks. Segment reporting supplements insights available from
consolidated financial statements. Complying with accounting standards ensures relevance,
transparency and comparability. Overall, the disclosures empower external parties to study
profitability drivers, make projections and efficiently allocate resources.
