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CA Intermediate · Advanced Accounting · AS 17 Segment Reporting

Dhruv Foods Ltd has total external revenue of ₹750 lakh, all earned by six segments with no inter-segment sales: A ₹280 lakh, B ₹200 lakh, C ₹80 lakh, D ₹70 lakh, E ₹60 lakh and F ₹60 lakh. Assume only the revenue test (10%) makes A, B and C reportable. What is the minimum number of additional segments that must be reported separately to satisfy AS 17?

One additional segment is needed. The three reportable segments give external revenue of ₹560 lakh, only about 74.7% of the enterprise total of ₹750 lakh. AS 17 requires at least 75% coverage, so another segment, such as D, must be added even though it is below 10%.

  1. A0
  2. B1Correct
  3. C2
  4. D3

Explanation

A, B and C have external revenue of 280+200+80 = ₹560 lakh, which is 74.67% of ₹750 lakh and below the 75% requirement (₹562.5 lakh). One more segment must be included even though it is below 10%. Adding D (₹70 lakh) lifts the total to ₹630 lakh (84%). Answer 0 ignores the 75% rule.

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