Corporate Financial Reporting · Operating Segments (Ind AS 108)

Ind AS 108 Objective and Scope Explained

Updated 11 October 2026 · Fact-checked

Ind AS 108 requires an entity to disclose information that lets users evaluate the nature and financial effects of its business activities and the economic environments in which it operates. It applies to companies to which Ind AS applies under the Companies Act. If a report has both consolidated and separate statements, segment information is needed only in the consolidated ones.

Understand Ind AS 108 Objective and Scope

Investors want to know more than the total profit of a company. They want to know which businesses earn it, and where. A company that sells cement, runs hotels and exports software cannot be understood from one set of totals. Ind AS 108 solves this by asking the company to show its numbers the way its own top management sees the business.

The core principle (paragraph 1) is this: an entity shall disclose information to enable users of its financial statements to evaluate the nature and financial effects of the business activities in which it engages and the economic environments in which it operates. Every other rule in the standard serves this sentence. When a question is unclear, go back to it.

Now the scope. Paragraph 2 says the standard applies to companies to which Indian Accounting Standards (Ind AS) notified under the Companies Act apply. This is the Indian position. The Ind AS text does not carry IFRS 8's own scope wording, which ties the standard to entities with publicly traded debt or equity instruments, or entities filing to issue instruments in a public market. Those words were deleted because applicability and exemptions are governed by the Companies Act and the Rules made under it. The paragraph number was kept so numbering matches IFRS 8. So in India, the test is whether Ind AS applies to the company, not a separate listing test written in the standard.

Two more scope points. First, paragraph 3: if an entity that is not required to apply Ind AS 108 chooses to disclose segment-type information that does not comply with it, it must not call that information segment information. Second, paragraph 4: if a financial report contains both the consolidated financial statements of a parent within the scope and the parent's separate financial statements, segment information is required only in the consolidated financial statements.

Finally, remember that Ind AS 108 is a management-approach standard. Segments follow how the chief operating decision maker reviews the business. In a matrix organisation (paragraph 10), where managers are responsible for both product lines and geographical areas, the entity decides which set forms the operating segments by reference to the core principle.

Key rules to remember

Core principle (para 1): Disclose information so users can evaluate: (i) nature and financial effects of business activities + (ii) economic environments in which the entity operates; Quote or paraphrase this in any objective question. Both limbs matter.
Scope in India (para 2): Applies to companies to which Ind AS notified under the Companies Act apply; IFRS 8's public-market wording is deleted in Ind AS; applicability comes from the Companies Act and its Rules.
Voluntary disclosure (para 3): Entity not required to apply Ind AS 108 + non-compliant segment disclosure = must not call it 'segment information'; Labelling restriction, not a ban on disclosing.
Consolidated vs separate (para 4): Report with consolidated + parent's separate statements → segment information only in the consolidated statements; Applies when the parent is within the scope of the standard.
Matrix organisation (para 10): Two overlapping sets of components reviewed by CODM → choose the set by reference to the core principle; Product lines versus geographical areas is the textbook example.

How to solve Ind AS 108 Objective and Scope questions

Use this sequence for any question on objective and scope of Ind AS 108.

1Identify what is asked: the objective, who must apply, or which statements carry the disclosure.
2For objective questions, state the core principle in full: nature and financial effects of business activities, and economic environments.
3For applicability, check whether Ind AS applies to the company under the Companies Act and its Rules. Do not invent a separate listing test.
4If the IFRS 8 wording on public markets is mentioned, explain that it is deleted in Ind AS, with the paragraph number retained for consistency.
5If both consolidated and separate statements are in one report, state that segment information is required only in the consolidated statements.
6If the entity is outside the scope but discloses segment data voluntarily, apply paragraph 3 on labelling.
7In a matrix organisation, pick the segment basis using the core principle.
8Close with a one-line conclusion that answers the exact question.

Quickest way: Three-question scope check

When to use it: For MCQs and case scenarios where you must decide quickly whether and where Ind AS 108 applies.

Q1: Does Ind AS apply to this company under the Companies Act? If no, Ind AS 108 is not required.
Q2: Is there a consolidated set along with the parent's separate statements? If yes, give segment information in the consolidated set only.
Q3: Is a non-required entity voluntarily disclosing non-compliant data? If yes, it must not call it segment information.

Common mistakes in Ind AS 108 Objective and Scope

Saying Ind AS 108 applies only to listed entities because IFRS 8 mentions public markets.
Students carry over IFRS 8 scope from textbooks or older notes.
Fix: Remember the IFRS 8 scope wording is deleted in Ind AS. Applicability follows the Companies Act and Rules for Ind AS.
Requiring segment information in both consolidated and separate statements of the parent.
Students assume every set of statements needs every disclosure.
Fix: When both are in one financial report, paragraph 4 requires it only in the consolidated statements.
Giving a half-answer on the core principle, mentioning only business activities.
The sentence is long and students trim it.
Fix: Always include both limbs: nature and financial effects of business activities, and the economic environments.
Thinking a non-required entity cannot disclose segment data at all.
Misreading paragraph 3 as a prohibition.
Fix: Paragraph 3 only restricts the label. If the disclosure does not comply, do not call it segment information.
Choosing segments by legal entity or product by default in a matrix organisation.
Students want a fixed rule.
Fix: Paragraph 10 says decide by reference to the core principle, since the CODM reviews both sets.

Worked examples

Example 1

Sunrise Industries Ltd, a parent that applies Ind AS, publishes one annual report containing its consolidated financial statements and its own separate financial statements. The CFO asks where segment information under Ind AS 108 must be given. Advise, with reasons.

Show the solution

Step 1: Sunrise applies Ind AS under the Companies Act, so it is within the scope of Ind AS 108 (paragraph 2).
Step 2: The report contains both consolidated and separate statements of the parent.
Step 3: Paragraph 4 says segment information is required only in the consolidated financial statements.
Step 4: Hence the separate statements need not carry segment information.

Answer: Segment information is required only in the consolidated financial statements of Sunrise Industries Ltd. It is not required in the separate statements.

Example 2

Himgiri Traders Pvt Ltd is not required to apply Ind AS 108. It wants to include a table of regional sales and profit, prepared on its own basis and not complying with the standard, headed 'Segment Information'. Can it do so? What is the objective that Ind AS 108 pursues in the first place?

Show the solution

Step 1: Himgiri is not required to apply the standard, so it is under no obligation to give segment disclosures.
Step 2: Paragraph 3 allows voluntary disclosure but says that if the information does not comply with Ind AS 108, it shall not be described as segment information.
Step 3: So the heading 'Segment Information' is not permitted. A neutral heading such as 'Regional sales and profit' can be used.
Step 4: The objective (paragraph 1) is to enable users to evaluate the nature and financial effects of the entity's business activities and the economic environments in which it operates.

Answer: Himgiri may disclose the table but must not call it segment information, because it does not comply with Ind AS 108. The standard's objective is to help users evaluate the nature and financial effects of business activities and the economic environments of operation.

Exam tips

Learn the core principle almost word for word. It is a favourite for short notes and MCQs.
In scope questions, mention that IFRS 8's public-market wording is deleted in Ind AS and applicability comes from the Companies Act and Rules.
For consolidated versus separate statements, answer in one clear line: consolidated only, per paragraph 4.
In case scenarios, end with a firm conclusion on who reports, where, and under what label.
Write paragraph numbers only for those you are sure of: 1, 2, 3, 4 and 10 are covered here.

Practice questions from Operating Segments (Ind AS 108)

Ind AS 108 Objective and Scope: frequently asked questions

What is the core principle of Ind AS 108?

An entity must disclose information that lets users evaluate the nature and financial effects of its business activities and the economic environments in which it operates. All other requirements of the standard support this aim.

Does Ind AS 108 apply only to listed companies?

The standard says it applies to companies to which Ind AS notified under the Companies Act apply. The IFRS 8 wording on public markets is deleted in Ind AS, since applicability and exemptions are governed by the Companies Act and its Rules.

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

If one financial report contains both, segment information is required only in the consolidated financial statements of the parent. The separate statements need not carry it.

Can a company outside Ind AS 108 still disclose segment data?

Yes, but if the information does not comply with Ind AS 108, it must not be described as segment information. Use a different label.