Financial Reporting · Ind AS 108 Operating Segments

Ind AS 108 Scope and Core Principle for CA Final

Updated 5 October 2026 · Fact-checked

Ind AS 108 applies to an entity whose debt or equity instruments are traded in a public market, or which files, or is in the process of filing, its financial statements with a regulator to issue such instruments in a public market. Its core principle is to disclose segments as management reviews them internally. To answer questions, test scope first, then apply the management approach.

Understand Ind AS 108 Scope and Core Principle

Ind AS 108 Operating Segments tells users how the business is split up and run. Investors want to see the parts of a group, such as a retail arm and a power arm, because each has different risk and growth.

The standard does not apply to every company. It applies to an entity whose debt or equity instruments are traded in a public market (a domestic or foreign stock exchange, or an over-the-counter market including local and regional markets). It also applies to an entity that files, or is in the process of filing, its financial statements with a securities commission or other regulatory organisation for the purpose of issuing any class of instruments in a public market.

The core principle is that an entity discloses information that lets users evaluate the nature and financial effects of the business activities it engages in and the economic environments in which it operates. The route to this is the management approach. You report segments the way the chief operating decision maker (CODM) reviews them to allocate resources and assess performance. You do not invent segments from accounting rules or geography charts.

This is why the segment numbers follow internal reports, even if they differ from the accounting policies used in the financial statements. The standard also asks for reconciliations back to the entity's reported totals.

If an entity not covered by scope chooses to give segment information and calls it 'segment information', it must comply fully with Ind AS 108. Where a financial report contains both consolidated and separate financial statements of the parent, segment information is required only in the consolidated statements.

On IFRS 8 differences: the core principle and scope follow IFRS 8. Be careful in the exam. Do not claim big differences unless you are sure. Ind AS 108 is largely aligned with IFRS 8, and the points you may be tested on are the Ind AS-specific wording and the Indian context, such as application by entities that are listed or in the process of listing.

Key rules to remember

Scope test: Ind AS 108 applies if: (debt or equity instruments traded in a public market) OR (filing, or in process of filing, financial statements with a regulator to issue instruments in a public market); Either limb is enough. An unlisted company with no listing plans is outside the standard's mandatory scope.
Consolidated and separate statements: Parent with consolidated + separate FS → segment information only in consolidated FS; Do not give it in the separate statements in the same report.
Core principle: Segments = components reviewed regularly by the CODM to allocate resources and assess performance; This is the management approach. Internal reporting drives external disclosure.
Voluntary disclosure: Entity outside scope that discloses segment information described as 'segment information' → must comply with Ind AS 108; Do not label partial or non-compliant disclosure as segment information.

How to solve Ind AS 108 Scope and Core Principle questions

Use this order for any scope or core principle question. It keeps your answer in provision, facts, conclusion form.

1Identify the entity and what instruments it has: debt, equity, or neither.
2Check limb one: are the instruments traded in a public market, domestic or foreign, including OTC?
3Check limb two: is the entity filing, or in the process of filing, financial statements with a regulator to issue instruments in a public market?
4If neither limb applies, state that Ind AS 108 is not mandatory, then check whether the entity voluntarily gives segment information.
5If the standard applies, identify the CODM and the reports used to allocate resources and assess performance.
6Apply the management approach: segments follow internal reporting, not the entity's own labels or accounting categories.
7Check the statements: if both consolidated and separate statements are presented, segment information goes in the consolidated statements.
8Write a clear conclusion that links the facts to the provision.

Quickest way: Two-gate check

When to use it: Use this for short MCQs and for the first paragraph of a written answer when time is limited.

Gate 1: Is there public trading or a filing to issue instruments publicly? If no, not mandatory.
Gate 2: If yes, ask who the CODM is and what they review.
Segments equal what the CODM reviews, not what the accounts department prefers.
Parent with two sets of statements: consolidated only.

Common mistakes in Ind AS 108 Scope and Core Principle

Saying every company must apply Ind AS 108.
Students link Ind AS applicability, based on net worth, with this standard's separate scope test.
Fix: Remember Ind AS 108 has its own scope: public market trading or filing to issue instruments publicly.
Limiting scope to listed equity shares only.
Students recall only the word 'listed'.
Fix: Include debt instruments as well as equity, and include entities in the process of filing for issue.
Defining segments by product or geography without checking internal reports.
Students use textbook business categories.
Fix: Ask what the CODM reviews. The segments follow that reporting.
Treating the CODM as a named person such as the CEO by default.
The title sounds like a specific post.
Fix: CODM is a function: the person or group that allocates resources and assesses performance. It could be an individual or a committee.
Presenting segment information in the separate statements of a parent as well.
Students miss the rule for reports with both sets of statements.
Fix: State that it is required only in the consolidated statements when both are presented together.
Claiming large differences from IFRS 8 without basis.
Students assume every Ind AS carve-out is major.
Fix: State that the core principle and scope are aligned with IFRS 8, and mention differences only if you know them.

Worked examples

Example 1

Case: Alpha Ltd is an unlisted company. It has issued equity shares only to its promoters. Last month its board approved a plan to issue shares to the public and it has begun filing its financial statements with SEBI for that purpose. The finance head says Ind AS 108 is not needed because Alpha is unlisted. Advise.

Show the solution

Provision: Ind AS 108 applies to an entity that files, or is in the process of filing, its financial statements with a regulator to issue any class of instruments in a public market.
Facts: Alpha is unlisted today but has begun filing with SEBI to issue shares to the public.
Application: The second limb of the scope test is met. Being unlisted at present does not take Alpha out of scope.

Answer: The finance head is wrong. Alpha is in the process of filing with a regulator to issue instruments publicly, so it must apply Ind AS 108 and disclose segment information.

Example 2

Case: Beta Ltd is listed. It prepares consolidated and separate financial statements in one annual report. The finance team has identified segments by legal entity for the external report, but the CODM, the executive committee, reviews monthly results only by three business lines for resource allocation. Advise on scope and segment identification.

Show the solution

Scope: Beta's equity is traded in a public market, so Ind AS 108 applies.
Statements: Beta presents both sets of statements in one report, so segment information is required only in the consolidated statements.
Core principle: Segments follow how the CODM reviews performance. The executive committee reviews three business lines.
Application: Identifying segments by legal entity does not follow the management approach.

Answer: Beta must apply Ind AS 108. It should give segment information in the consolidated statements only, and base the segments on the three business lines reviewed by the CODM, subject to the standard's aggregation and quantitative threshold rules.

Exam tips

Start every scope answer with the two limbs: public market trading, or filing to issue instruments publicly.
In case questions, look for clues such as debt-only listing, an IPO filing under way, or a parent with two sets of statements.
Write the CODM as a function, not a designation, and tie segments to what is reviewed for resource allocation.
On IFRS 8, say the standard is substantially aligned and avoid inventing differences.
MCQs have no negative marking, so attempt all of them.

Practice questions from Ind AS 108 Operating Segments

Ind AS 108 Scope and Core Principle: frequently asked questions

Which entities must apply Ind AS 108?

Entities whose debt or equity instruments are traded in a public market, and entities filing, or in the process of filing, financial statements with a regulator to issue instruments in a public market. Either condition is enough.

What is the core principle of Ind AS 108?

An entity discloses information that helps users evaluate the nature and financial effects of its business activities and the economic environments in which it operates. It does this through the management approach, using the segments the CODM reviews.

Is Ind AS 108 different from IFRS 8?

The scope and core principle are aligned with IFRS 8. Do not assume large differences. Mention a difference only if your study material states it.

Where is segment information given if a parent presents consolidated and separate statements?

Only in the consolidated financial statements. The separate statements in the same report do not need it.