Start with the framework and the decision-making evidence
Ind AS 108 applies to companies to which notified Ind AS applies, including unlisted companies within that framework. IFRS 8 has its own scope, covering public market issuers and entities filing or preparing to file for a public issuance, including the relevant consolidated statements. Do not import that public-market scope test into Ind AS 108. Under paragraph 4, where a financial report contains both the in-scope parent’s consolidated statements and its separate statements, the segment information is required only in the consolidated statements. Companies using notified Accounting Standards instead should assess AS 17 and its applicable exemptions.
An operating segment is a component that conducts business activities capable of producing revenue and expense, whose results the chief operating decision maker (CODM) regularly reviews for performance and resource allocation, and for which discrete financial information is available. A start-up component can qualify before earning revenue; general corporate functions with only incidental revenue generally do not. Post-employment benefit plans are not operating segments.
CODM identifies a function, not a title. It can be an individual or a group. Identify who allocates resources and assesses performance in practice, using recurring reporting packs, budgets, meeting records and approvals. Where product and geography reports overlap, assess the available information and managers’ responsibilities consistently with the standard’s core principle.
Apply aggregation and reporting tests in order
Paragraph 12 permits aggregation if consistent with the core principle, the components have similar economic characteristics, and they are similar across products and services, processes, customers, distribution or service delivery and, where applicable, regulation. Paragraph 14 separately allows qualifying combinations of below-threshold segments if they have similar economic characteristics and share a majority of the paragraph 12 criteria. Document judgments and the indicators used.
| Paragraph 13 test | Threshold |
|---|---|
| Revenue | At least 10% of combined internal and external revenue of all operating segments. |
| Profit or loss | Absolute segment result is at least 10% of the larger absolute total of profitable and loss-making segments. Do not net those totals. |
| Assets | At least 10% of combined assets of all operating segments, applied using the relevant segment measures. |
Meeting any one test is sufficient for separate reporting, subject to applicable aggregation. A smaller segment can be reported separately when useful. If external revenue of reportable segments is below 75% of the entity’s external revenue, add segments until coverage reaches at least 75%. Combine remaining non-reportable segments and other business activities in an “all other segments” category separate from other reconciling items. Describe the sources of its revenue.
Seven worked cases
1. Apply all three thresholds to six divisions
Amounts are in ₹ crore, with no aggregation assumed.
| Segment | External revenue | Inter-segment revenue | Total revenue | Profit/loss | Assets | Tests met |
|---|---|---|---|---|---|---|
| A: Auto | 120 | 30 | 150 | 24 | 110 | Revenue, Profit/loss, Assets |
| B: Aerospace | 65 | 5 | 70 | 16 | 75 | Revenue, Profit/loss, Assets |
| C: Chemicals | 40 | 0 | 40 | -18 | 50 | Revenue, Profit/loss, Assets |
| D: Logistics | 25 | 15 | 40 | 4 | 28 | Revenue |
| E: Solar | 15 | 0 | 15 | 2 | 35 | Assets |
| F: Packaging | 10 | 0 | 10 | -3 | 12 | None |
Combined revenue is ₹325 crore, including ₹50 crore internal revenue, giving a ₹32.50 crore threshold. The larger of combined profits of ₹46 crore and absolute losses of ₹21 crore gives a ₹4.60 crore result threshold. Assets total ₹310 crore, giving a ₹31 crore threshold. A through E qualify. Their ₹265 crore external revenue is 96.36% of ₹275 crore, exceeding the 75% minimum of ₹206.25 crore. F’s ₹10 crore goes to “all other segments” on these facts.
2. Add a segment when external revenue coverage is too low
Assume no inter-segment sales and the profit/loss and asset tests add no reportable units. Five operating units earn external revenue of ₹60, ₹8, ₹7, ₹6 and ₹19 crore, totalling ₹100 crore. At a ₹10 crore revenue threshold, units 1 and 5 cover 79%. In a separate scenario, unit 5 has ₹12 crore and a sixth unit earns the remaining ₹7 crore, so total external revenue remains ₹100 crore. Initial coverage is 72%; reporting unit 2 separately brings it to 80% even though it is below the 10% thresholds.
3. Test retail and online aggregation
Assume the stores and online division are each operating segments. Their three-year average EBITDA margins are 18.5% and −4.2%, a 22.7 percentage point gap. Different distribution and cost structures also point against paragraph 12 aggregation on these facts. Investigate long-term economics, including whether the difference is temporary, and document the result. Failure of aggregation does not itself establish that both segments meet a reporting threshold.
4. Reconcile internal transfers
Weaving transfers ₹45 crore to Garments at a 20% margin on transfer value, or ₹9 crore internal profit. Transferred goods with ₹15 crore of transfer value remain in inventory, including ₹3 crore unrealised profit. Assume the CODM measures include the internal transfer. Combined segment revenue of ₹145 crore less ₹45 crore internal revenue gives ₹100 crore consolidated revenue. Combined segment profit of ₹24 crore less ₹3 crore unrealised profit gives ₹21 crore consolidated profit before tax, assuming no other adjustments. Identify material reconciling items separately.
5. Disclose major external customers
At ₹180 crore entity revenue, the paragraph 34 threshold is ₹18 crore. Customers accounting for ₹42 crore (23.33%) and ₹24 crore (13.33%) both meet it. Disclose the fact, amount from each such customer and which segment or segments report it. The standard does not require the customer’s name or revenue reported by each individual segment for that customer. Assess entities under common control as a single customer where required, and use judgement for government-related customer grouping as specified in the standard.
6. Present geographical revenue and non-current assets
Assume external revenues attributed by customer location are India ₹45 crore, US ₹185 crore, UK and other Europe ₹55 crore and other foreign markets ₹15 crore, totalling ₹300 crore. India is 15%; US is 61.67%; the remaining two groups are 18.33% and 5%. Assume the relevant non-current assets are ₹125, ₹8, ₹2 and nil crore, totalling ₹135 crore, with 92.59% in India. Disclose India and all foreign countries in total and disclose any individually material foreign country separately. Obtain country-level data to test whether the UK or another country needs separate disclosure. Disclose the revenue attribution basis and apply paragraph 33’s exclusions for financial instruments, deferred tax assets, post-employment benefit assets and rights under insurance contracts.
7. Restate comparatives after the segment structure changes
If Mobile Devices and Tablets are combined in the internal reporting structure from 1 April 2024 and this changes the composition of reportable segments, paragraph 29 requires restating corresponding earlier information, including interim periods, unless the information is unavailable and the cost of developing it would be excessive. Assess each disclosure item. If comparatives are not restated, paragraph 30 requires current-period information on both bases unless its own exception applies. A business reorganisation or the identification of a cash-generating unit does not by itself establish a change in the reportable segments.
Prepare the disclosure and reconciliation file
Describe how segments were identified and how reported profit or loss is measured. Disclose total assets and liabilities for each reportable segment when those amounts are regularly provided to the CODM, and check other specified items under paragraph 23. Use the actual measures and a reasonable basis for allocations included in them; central debt need not be assigned artificially if the CODM does not use such an allocation. Reconcile required measures to entity amounts under paragraph 28. Disclose significant items separately as applicable.
Review the entity-wide product and service, geography and major customer disclosures even when there is only one reportable segment. Keep a consistent threshold model, trace it to the financial statements and check whether a previously reportable segment remains of continuing significance or a newly reportable segment requires comparative disclosure under paragraphs 17–18.