Advanced Accounting · AS 17 Segment Reporting

AS 17: Identifying Reportable Segments and the 10% Tests

Updated 4 October 2026 · Fact-checked

A reportable segment under AS 17 is a business or geographical segment that passes at least one 10% test: revenue (external plus inter-segment), segment result, or segment assets, each measured against the total of all segments. Then check that reportable segments cover at least 75% of enterprise external revenue. If not, add more segments.

Understand Identifying Reportable Segments and 10% Tests

AS 17 asks a company to split its results into parts that carry different risks and returns. Readers of the accounts can then see which products or regions earn the profit and which carry the risk.

A business segment is a distinguishable component that provides a product or service, or a group of related products or services, and is subject to risks and returns different from other business segments. A geographical segment provides products or services within a particular economic environment, with risks and returns different from other economic environments. You judge these by factors such as the nature of products, production process, type of customer, distribution method, and for regions, political conditions, exchange control and currency risk.

Not every segment must be reported. Tiny segments would clutter the accounts. So the standard sets size tests. A segment is reportable if it meets any one of three 10% tests: revenue, result or assets. Passing one test is enough.

There is also a safety net, the 75% rule. If the total external revenue of the reportable segments is less than 75% of total enterprise revenue, you must name more segments as reportable, even though they fail the 10% tests, until the 75% level is reached.

Once segments are reportable, you pick the primary format. The dominant source and nature of risks and returns decide it. If they come mainly from products or services, business segments are primary and geographical segments are secondary. If they come mainly from geography, it is the other way round.

Key rules to remember

Revenue test: Segment revenue (external + inter-segment) ≥ 10% × total revenue of all segments (external + inter-segment); The denominator is the sum of all segments' revenue before eliminating inter-segment sales.
Result test: |Segment result| ≥ 10% × the greater of (total of segments in profit) and (total of segments in loss, taken as a positive number); A loss-making segment is tested on its loss. Compare each result with 10% of the larger of the two totals.
Asset test: Segment assets ≥ 10% × total assets of all segments; The base is the total of segment assets of all segments. Unallocated corporate assets are excluded.
75% rule: External revenue of reportable segments ≥ 75% × total enterprise external revenue; If this fails, add further segments as reportable until the 75% level is met. AS 17 does not prescribe the order in which to add them. Adding the largest first is only a practical convention.
Segment result: Segment result = Segment revenue − Segment expense; Exclude interest, dividend income, gains on investments, extraordinary items, income tax and enterprise-level general expenses, unless they relate to the segment's operations.
Any one test is enough: Reportable if revenue test OR result test OR asset test is met; You do not need to pass all three.
Primary and secondary format: Dominant risks and returns from products/services → business primary, geographical secondary; from geography → geographical primary, business secondary; Primary format needs fuller disclosure than secondary.

How to solve Identifying Reportable Segments and 10% Tests questions

Use this order for any numerical on reportable segments. Keep the working in a small table so the examiner can follow each test.

1List each segment with external revenue, inter-segment revenue, segment result and segment assets.
2Compute total revenue of each segment (external + inter-segment) and the total across all segments. Take 10% of it.
3Test revenue: mark each segment whose total revenue is at or above that 10% figure.
4Total the segment results in profit and the segment results in loss separately. Take 10% of the larger total. Mark each segment whose result, profit or loss, is at or above it.
5Total segment assets. Take 10% and mark each segment at or above it.
6A segment marked in any one test is reportable. List the reportable segments.
7Add the external revenue of the reportable segments and compare it with total enterprise external revenue. If it is below 75%, add more segments until it reaches 75%. AS 17 gives no order, so state that you add the largest first as a practical convention.
8State the conclusion in a line: which segments are reportable and which are combined under others or reconciling items.

Quickest way: Three 10% lines and one 75% check

When to use it: Use this in the MCQ section and in written answers when time is short.

Write the three thresholds first: 10% of total revenue, 10% of the larger of profit total or loss total, and 10% of total assets.
Scan the segments and tick any that pass. Do not compute for segments that already passed one test.
Check 75% by adding the external revenue of the ticked segments only.
For MCQs, remember a loss-making segment can still be reportable on the result test, and that a segment failing revenue may pass on assets.
In a written answer, show a four-column table: revenue test, result test, asset test, conclusion. Step marks go to each threshold figure, so write it even when the answer looks obvious.

Common mistakes in Identifying Reportable Segments and 10% Tests

Using only external revenue as the denominator or numerator in the revenue test.
Students link revenue with the P&L figure, which excludes inter-segment sales.
Fix: For the 10% revenue test, use external plus inter-segment revenue for both the segment and the total. Use external revenue only for the 75% rule.
Treating a loss-making segment as non-reportable.
Students think of results as profits only.
Fix: Test the size of the result, profit or loss. Compare it with 10% of the greater of total profits and total losses.
Taking 10% of net combined result (profit minus loss) in the result test.
It feels natural to add all results together.
Fix: Add profits and losses separately. Use the larger of the two totals as the base.
Stopping after the 10% tests without checking the 75% rule.
Students think a segment is either reportable or not once the tests are done.
Fix: Always add the external revenue of reportable segments and compare with total enterprise external revenue. Add more segments if it is below 75%.
Requiring a segment to pass all three tests.
Students read the three tests as a combined condition.
Fix: Passing any one test makes it reportable.
Mixing up primary and secondary segments.
Students assume business is always primary.
Fix: Decide by the dominant source of risks and returns. Business is primary only when risks and returns are mainly driven by products or services.

Worked examples

Example 1

A company reports the following segments (₹ in lakh). Segments are P, Q, R, S and T. External revenue: 520, 300, 90, 60, 30. Inter-segment revenue: 80, 20, 10, 0, 0. Segment result: 130, 60, (30), 12, (10). Segment assets: 400, 250, 90, 40, 20. Total enterprise external revenue is ₹1,000 lakh. Identify the reportable segments.

Show the solution

Total revenue of each segment: P 600, Q 320, R 100, S 60, T 30. Total of all segments = 1,110. 10% = 111.
Revenue test: P (600) and Q (320) pass. R (100), S (60) and T (30) fail.
Result test: profits total = 130 + 60 + 12 = 202. Losses total = 30 + 10 = 40. Greater is 202, so 10% = 20.2.
Results: P 130 passes, Q 60 passes, R loss of 30 is more than 20.2 and passes, S 12 fails, T loss of 10 fails.
Asset test: total assets = 400 + 250 + 90 + 40 + 20 = 800. 10% = 80. P, Q and R (90) pass. S (40) and T (20) fail.
Reportable on at least one test: P, Q and R.
75% rule: external revenue of P, Q and R = 520 + 300 + 90 = 910. As a share of 1,000 it is 91%, which is at least 75%. No further segment is needed.

Answer: P, Q and R are reportable segments. S and T are not reportable and are shown under others in the reconciliation. The 75% rule is met at 91%.

Example 2

A company has six segments A to F with no inter-segment sales (₹ in lakh). Revenue: A 450, B 200, C 95, D 90, E 85, F 80. Results: A 90, B 30, C 9, D 8, E 7, F 6. Assets: A 500, B 250, C 70, D 60, E 60, F 60. Identify the reportable segments.

Show the solution

Total revenue = 450 + 200 + 95 + 90 + 85 + 80 = 1,000. 10% = 100. A (450) and B (200) pass. C to F are below 100.
Total profit = 90 + 30 + 9 + 8 + 7 + 6 = 150. There are no losses, so 10% = 15. A (90) and B (30) pass. C to F are below 15.
Total assets = 500 + 250 + 70 + 60 + 60 + 60 = 1,000. 10% = 100. A (500) and B (250) pass. C to F are below 100.
Reportable on the 10% tests: A and B.
75% test: external revenue of A and B = 450 + 200 = 650, which is 65% of 1,000. This is below 75%, so more segments are needed.
AS 17 does not prescribe the order in which to add segments. As a practical convention, add the largest remaining segment first. Add C (95): 650 + 95 = 745, which is 74.5%. Still below 75%.
Add D (90): 745 + 90 = 835, which is 83.5%. This is at least 75%, so stop.

Answer: A and B are reportable on the 10% tests. On the assumption that the largest segments are added first (a convention, not a requirement of AS 17), C and D are also reported to satisfy the 75% rule, giving four reportable segments covering 83.5% of external revenue. E and F are reported under others.

Exam tips

In numericals, show the three 10% thresholds as figures before ticking segments. Step marks are given for each threshold.
Use the revenue test with external plus inter-segment revenue. Use external revenue only for the 75% rule. State this in one line in your answer.
For the result test, write the profit total and loss total separately, then say which is greater.
If the question asks for primary and secondary formats, decide using the dominant source of risks and returns and give the reason in one sentence.
In MCQs, check whether a segment passes on any one test before computing the other two. Wrong answers carry no negative marks, so always attempt every MCQ.

Practice questions from AS 17 Segment Reporting

Identifying Reportable Segments and 10% Tests in other exams

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

Identifying Reportable Segments and 10% Tests: frequently asked questions

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

No. Passing any one of the revenue, result or asset test makes it reportable. You only need to run the remaining tests to find other reportable segments.

Why can a loss-making segment be reportable?

The result test looks at the size of the result, whether profit or loss. A loss of 10% or more of the greater of total profits and total losses makes the segment reportable.

What happens if the 75% test fails?

If external revenue of reportable segments is below 75% of total enterprise external revenue, you identify additional segments as reportable even if they fail the 10% tests. AS 17 does not prescribe the order, so adding the largest first is only a practical convention. Continue until the 75% level is met.

How do I decide which format is primary?

Look at the dominant source and nature of the enterprise's risks and returns. If they are driven mainly by products or services, business segments are primary and geographical segments are secondary. If they are driven mainly by geography, the reverse applies.