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Financial Reporting · Ind AS 108 Operating Segments

Ind AS 108: Aggregation Criteria and Quantitative Thresholds

Updated 5 October 2026 · Fact-checked

Ind AS 108 requires separate reporting of an operating segment if it meets any one 10% test: revenue (internal and external), absolute profit or loss, or assets. Similar segments may be aggregated. If reportable segments' external revenue is below 75% of entity revenue, add more segments until it reaches 75%.

Understand Aggregation Criteria and Quantitative Thresholds

Ind AS 108 first asks you to identify operating segments the way the chief operating decision maker (CODM) reviews the business. Not every operating segment is then reported separately. The standard uses aggregation and size tests to decide which ones become reportable segments.

Aggregation is optional. You may combine two or more operating segments into one only if combining is consistent with the core principle of the standard, and the segments have similar economic characteristics. They must also be similar in all of these: nature of products and services, nature of production processes, type or class of customer, methods of distribution, and (if applicable) nature of the regulatory environment. Similar long-term average gross margins are the usual sign of similar economic characteristics.

After any aggregation, apply the quantitative thresholds. A segment is reportable if it meets any one of three tests: (a) its reported revenue, internal and external together, is 10% or more of the combined revenue of all operating segments; (b) the absolute amount of its reported profit or loss is 10% or more of the greater, in absolute terms, of the combined profit of all profit-making segments and the combined loss of all loss-making segments; (c) its assets are 10% or more of the combined assets of all operating segments.

Finally, apply the 75% test. The total external revenue of the reportable segments must be at least 75% of the entity's total revenue. If not, identify additional operating segments as reportable, even if they fail the 10% tests, until 75% is reached. Segments that remain are combined in an 'all other segments' category. Small segments below the thresholds may also be combined with each other if they share a majority of the aggregation criteria.

Key rules to remember

Revenue test
Segment revenue (external + inter-segment) ≥ 10% × total revenue of all operating segments
Total is the sum of segment revenues including inter-segment, before eliminations.
Profit or loss test
|Segment profit or loss| ≥ 10% × greater of (total profit of profitable segments, total loss of loss-making segments in absolute terms)
Compute both totals, pick the larger, then take 10%. Treat losses as positive numbers.
Asset test
Segment assets ≥ 10% × total assets of all operating segments
Use the same asset measure the CODM reviews.
75% external revenue test
External revenue of reportable segments ≥ 75% × entity revenue
Entity revenue is after eliminating inter-segment revenue. If short, add segments until the test is met.
Aggregation conditions
Consistent with core principle + similar economic characteristics + similar in products/services, production processes, customers, distribution methods, regulatory environment
Aggregation is permitted, not compulsory.

How to solve Aggregation Criteria and Quantitative Thresholds questions

Use the same order every time: identify, aggregate, test, check 75%, then conclude.

  1. 1List the operating segments as reviewed by the CODM and note revenue (external and inter-segment), profit or loss, and assets for each.
  2. 2Check whether any segments can be aggregated: similar economic characteristics (for example gross margins) and similarity in all the listed factors. Aggregate only if asked or clearly justified.
  3. 3Compute totals: segment revenue including inter-segment, profits of profitable segments, losses of loss-making segments, and total assets.
  4. 4Take 10% of each total (for profit, of the larger of total profit and total loss). Compare each segment against each threshold; meeting any one test makes it reportable.
  5. 5Add the external revenue of reportable segments and compare with 75% of entity revenue.
  6. 6If below 75%, add further segments (largest first is sensible) until the test is met.
  7. 7Name the remaining segments as 'all other segments' and state the conclusion clearly with figures.

Quickest way: Three-column tick table

When to use it: Numerical questions with five or more segments and little time.

  1. Draw a table with segments as rows and columns for revenue, profit or loss (absolute), assets.
  2. Write the three 10% cut-offs at the top of each column first.
  3. Tick each cell that meets or exceeds the cut-off; one tick makes the segment reportable.
  4. Sum external revenue of ticked segments and compare with 75% of entity revenue.
  5. Write one line of conclusion per segment; this earns the marks.

Common mistakes in Aggregation Criteria and Quantitative Thresholds

  • Using only external revenue for the 10% revenue test.

    Students mix it up with the 75% test, which uses external revenue.

    Fix: For the 10% revenue test include inter-segment revenue; for the 75% test use only external revenue.

  • Taking 10% of total net profit for the profit test.

    Profits and losses get netted off automatically.

    Fix: Compare the combined profit of profitable segments with the combined loss of loss-making segments, take the greater in absolute terms, then 10%.

  • Requiring all three tests to be met.

    Confusion with conditions that must all be met.

    Fix: A segment needs to meet only one of the three tests.

  • Treating aggregation as compulsory.

    The word 'may' is overlooked.

    Fix: Aggregation is permitted only when all conditions are satisfied; it is a choice, not a requirement.

  • Stopping after the 10% tests without checking 75%.

    Students assume the tests alone finish the job.

    Fix: Always compute the 75% test and add segments if short.

  • Using a loss as a negative number in the profit test.

    Sign is carried into the comparison.

    Fix: Use the absolute amount of a segment's profit or loss.

Worked examples

Example 1

Shreya Ltd has five operating segments reviewed by its CODM (₹ lakh): A: revenue 520 (external 480), profit 60, assets 400. B: revenue 300 (external 260), profit 30, assets 250. C: revenue 90 (external 90), loss (45), assets 70. D: revenue 60 (external 60), profit 6, assets 40. E: revenue 30 (external 30), loss (15), assets 40. Total entity revenue after eliminations is ₹920 lakh. Identify the reportable segments.

Show the solution
  1. Total segment revenue = 520 + 300 + 90 + 60 + 30 = 1,000. 10% = 100.
  2. Total profit of profitable segments = 60 + 30 + 6 = 96. Total loss = 45 + 15 = 60. Greater = 96. 10% = 9.6.
  3. Total assets = 400 + 250 + 70 + 40 + 40 = 800. 10% = 80.
  4. A: revenue 520 ≥ 100, so reportable. B: revenue 300 ≥ 100, so reportable.
  5. C: revenue 90 < 100; |loss| 45 ≥ 9.6, so reportable by profit test; assets 70 < 80.
  6. D: revenue 60 < 100; profit 6 < 9.6; assets 40 < 80. Fails all tests.
  7. E: revenue 30 < 100; |loss| 15 ≥ 9.6, so reportable by profit test.
  8. 75% test: external revenue of A, B, C, E = 480 + 260 + 90 + 30 = 860. 75% of 920 = 690. 860 ≥ 690, so satisfied.

Answer: Segments A, B, C and E are reportable. D fails all three 10% tests and is shown under 'all other segments'. The 75% test is met (₹860 lakh against ₹690 lakh required).

Example 2

Mehra Ltd has operating segments P, Q, R, S (₹ crore). Revenue (all external): P 700, Q 150, R 80, S 70. Profit: P 90, Q 12, R 5, S 3. Assets: P 600, Q 130, R 90, S 80. Entity revenue is ₹1,000 crore. Apply the 10% tests to P, Q, R and S and determine which are reportable, and whether the 75% test is met.

Show the solution
  1. Total revenue = 1,000; 10% = 100. Total profit = 110; no losses, so 10% = 11. Total assets = 900; 10% = 90.
  2. P: revenue 700, profit 90, assets 600. Reportable.
  3. Q: revenue 150 ≥ 100, so reportable (profit 12 ≥ 11 and assets 130 ≥ 90 as well).
  4. R: revenue 80 < 100; profit 5 < 11; assets 90 ≥ 90, so reportable by asset test.
  5. S: revenue 70 < 100; profit 3 < 11; assets 80 < 90. Fails all tests.
  6. External revenue of reportable segments P, Q, R = 700 + 150 + 80 = 930. 75% of 1,000 = 750. 930 ≥ 750, so the test is met.

Answer: P, Q and R are reportable (R only through the asset test, as 90 equals the 10% threshold). S is included in 'all other segments'. The 75% test is met, so no further segments need to be added.

Exam tips

  • Show the three 10% cut-offs as separate lines of working; examiners award marks for each computation.
  • State the rule in one line before applying it, then conclude in a sentence for each segment.
  • Remember that 'equal to 10%' qualifies, because the wording is 10% or more.
  • In case-scenario MCQs, check whether the figures given are external or include inter-segment before choosing the base.
  • For aggregation questions, list each criterion and say whether it is met; a single mismatch means no aggregation.

Practice questions from Ind AS 108 Operating Segments

Aggregation Criteria and Quantitative Thresholds in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Aggregation Criteria and Quantitative Thresholds: frequently asked questions

Does a segment need to pass all three 10% tests?

No. Meeting any one test, revenue, profit or loss, or assets, makes it reportable. The tests are alternatives.

What happens if the 75% test is not met?

You must identify additional operating segments as reportable until at least 75% of entity revenue is covered by reportable segments' external revenue. This applies even if those segments fail the 10% tests.

Is aggregation of operating segments mandatory?

No. Aggregation is permitted when segments have similar economic characteristics and are similar in the listed factors. The entity may also choose to report them separately.

Which revenue is used in the 10% revenue test?

Reported segment revenue, which includes both external sales and inter-segment sales. The 75% test, in contrast, uses external revenue only.