CA Intermediate · Advanced Accounting

AS 17 Segment Reporting: CA Intermediate Advanced Accounting

AS 17 requires an enterprise to report financial information by business and geographical segments. To solve questions, first identify the primary and secondary segment basis, then apply the 10% tests on revenue, result and assets, check the 75% external revenue rule, and finally prepare the disclosures in the prescribed format.

What this chapter covers

AS 17 Segment Reporting deals with how a diversified enterprise breaks its results into parts. A company selling different products or working in different regions has different risks and returns in each. The standard tells you how to split revenue, result, assets and liabilities by segment so users can judge each part separately.

This page follows AS 17, the Accounting Standard prescribed by ICAI for CA Intermediate Advanced Accounting. Ind AS 108 is the corresponding standard for enterprises that follow Ind AS. It is a separate standard with its own approach, so do not mix its rules into AS 17 answers.

The chapter is short and mostly numerical. Most exam questions give a table of segment revenue, results and assets, then ask you to decide which segments are reportable and to present the disclosures. The logic is a fixed sequence: define segments, run the 10% tests, check the 75% coverage, allocate common items, and disclose.

In Advanced Accounting this chapter sits with the other Accounting Standards. It links to AS 1 (accounting policies), AS 21 (consolidated financial statements), and to company accounts, where segment information appears alongside the financial statements. Treat it as a scoring chapter that needs clean definitions and a tidy working table.

AS 17 is a compact chapter with a repeatable question pattern, so a student who learns the tests and the format can score well with little study time. It can appear as MCQs on definitions and the 10% tests, or as a descriptive question needing a working of reportable segments and disclosures. Marks come from the steps: each test shown separately, the conclusion stated, and the format followed. Because the logic is mechanical, careless errors in the tests are the main way to lose marks, and they are easy to avoid with practice.

AS 17 Segment Reporting: topics in the order to study them

1AS 17 Objective, Scope and Key DefinitionsEvery later step depends on the scope (which enterprises must apply AS 17) and on terms like business segment, geographical segment, segment revenue, segment result and segment assets, so learn them first.
2Identifying Reportable Segments and 10% TestsThis is the most tested numerical part, and it needs the definitions to be clear before you apply the tests.
3Segment Accounting Policies and AllocationOnce you know the reportable segments, you learn how revenue, expenses, assets and liabilities are measured and allocated to them.
4Segment Disclosures: Primary and Secondary FormatsDisclosure is the final output, so it comes last, after you can work out the figures that go into it.

How to prepare AS 17 Segment Reporting

Aim to finish this chapter in a few focused sittings. Spend your time on the tests and the format, and keep theory as short notes.

Read the definitions once and write them in your own words on one page. Pay attention to what is included in and excluded from segment revenue, result and assets.
Learn the three 10% tests: segment revenue, segment result and segment assets. Know that a segment is reportable if it meets any one of them, and know exactly what each test is measured against.
Learn how the result test works when some segments make profits and others make losses. Compare the absolute result with the greater of the combined profit or combined loss.
Practise the 75% check: if the reportable segments' external revenue is less than 75% of total enterprise revenue, add more segments until it reaches 75%, even if they fail the 10% tests.
Solve ICAI-style questions using a working table with one row per segment and one column per test. State the conclusion for each segment in words.
Practise the disclosure format for primary and secondary segments. Memorise which items are required for primary and which for secondary.
Finish by attempting MCQs on definitions, thresholds and the primary versus secondary distinction.

Common mistakes in AS 17 Segment Reporting

Requiring a segment to pass all three 10% tests.
Fix: Remember it is an either-or rule. Passing any single test makes the segment reportable.
Using the wrong denominator in the result test.
Fix: Add profits of profitable segments and losses of loss-making segments separately, take the larger figure, then test each segment's absolute result against 10% of it.
Forgetting the 75% external revenue check.
Fix: Always add a final line in your working that compares the reportable segments' external revenue with 75% of enterprise revenue, and add segments if needed.
Mixing up primary and secondary format disclosures.
Fix: Keep two separate memory lists. Primary needs the full set of items, while secondary needs a shorter set.
Including unallocable corporate items in segment figures.
Fix: Keep unallocated items separate and show a reconciliation between segment totals and the enterprise's financial statements.
Giving a bare answer without showing the working table.
Fix: Show each test per segment with the 10% threshold figure written out, then state the conclusion, so step marks are earned even if one number is off.

Last-day revision: AS 17 Segment Reporting

A segment is reportable if it meets any one of the 10% tests, not all of them.
The three tests use revenue, result and assets. The revenue and asset tests compare against the totals of all segments, while the result test compares against the greater of combined profit or combined loss.
Segment revenue test (10%): segment revenue, from sales to external customers plus transactions with other segments, is 10% or more of the total revenue, external plus internal, of all segments.
Segment result test: absolute result is 10% or more of the greater of combined profit of profitable segments or combined loss of loss-making segments.
Segment asset test: segment assets are 10% or more of total assets of all segments.
The 75% rule uses a different base from the 10% revenue test. It compares only the external revenue of the reportable segments against total enterprise revenue. If that external revenue is less than 75% of enterprise revenue, identify additional segments as reportable, even if they do not meet the 10% thresholds, until at least 75% is covered.
Primary format is business or geographical, based on the dominant source and nature of risks and returns.
The other basis becomes the secondary format, with fewer disclosures.
Segment accounting policies follow those used for the enterprise financial statements.
Common costs that cannot be reasonably allocated stay as unallocated items and are reconciled to the totals.
A segment identified as reportable in the immediately preceding period, but which no longer meets the 10% thresholds, continues to be reported separately if management judges it to be of continuing significance.
Presentation: segment information is given alongside the financial statements.
Applicability: AS 17 applies to companies that are not Small and Medium Companies (SMCs), and to Level I non-corporate entities. Small and Medium Companies and Level II and Level III non-corporate entities are exempt. Level I non-corporate entities are those with listed or to-be-listed securities, banks, financial institutions and insurers, those with turnover (excluding other income) above ₹50 crore, those with borrowings (including public deposits) above ₹10 crore at any time during the year, and holding or subsidiary entities of any of these. An enterprise outside these conditions that voluntarily presents segment information must comply with AS 17.

AS 17 Segment Reporting practice questions

AS 17 Segment Reporting in other exams

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

AS 17 Segment Reporting: frequently asked questions

Is AS 17 important for the CA Intermediate exam?

Yes. It is a short chapter with a predictable pattern, and it can appear in both the MCQ and the descriptive parts. Learning the tests and the format gives reliable marks.

How do I decide whether a segment is reportable?

Apply the three 10% tests on revenue, result and assets. If a segment meets any one, it is reportable. Then check that the external revenue of the reportable segments is at least 75% of total enterprise revenue. If it is less, identify more segments as reportable.

What is the difference between primary and secondary segment formats?

The primary format is the main basis of segmenting, either business or geographical, depending on the dominant source of risks and returns. The other basis is secondary and needs fewer disclosures.

How should I write an AS 17 numerical answer?

Draw a working table with each segment and each test, show the 10% threshold, and write a one-line conclusion per segment. End with the 75% check and the disclosure format asked for.