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CA Final · Financial Reporting · Ind AS 108 Operating Segments

Arjun Pharma Ltd's board reviews a monthly pack with two presentations: (i) by therapeutic division, each headed by a division head who is accountable to the CODM and has discrete financial information; and (ii) by state-wise sales offices, which only report sales volumes and have no managers accountable to the CODM for segment results. The CODM allocates resources and assesses performance using both packs. The finance team proposes state-wise offices as segments. Which conclusion best follows Ind AS 108?

Therapeutic divisions are more likely the operating segments. When the CODM uses several sets of information, Ind AS 108 looks to the nature of activities, existence of managers responsible and board information, all of which favour the divisions, not the state sales offices.

  1. AState-wise offices should be segments because they are more numerous and detailed
  2. BBoth sets must be reported as operating segments because the CODM uses both
  3. CNeither set can be segments since the board, not the CODM, receives the pack
  4. DTherapeutic divisions are more likely the operating segments, as the nature of activities, the existence of responsible managers and board information point to them rather than to state officesCorrect

Explanation

With more than one set used by the CODM, Ind AS 108 directs the entity to other factors: nature of business activities, existence of responsible managers and information presented to the board. Divisions have accountable heads and discrete financials, while state offices have no managers accountable for results. So divisions are the single set; reporting both is not what the standard prescribes.

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