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CA Intermediate · Advanced Accounting · AS 17 Segment Reporting

Himalaya Foods Ltd. sells packaged snacks, beverages and dairy products and has customers in India, Nepal and Bangladesh. Its management finds that its risks and returns are affected predominantly by differences in the products and services it offers. The differences in the geographies it operates in are of lesser influence. Under AS 17, how should the company present its primary and secondary segment information?

Business segments should be the primary reporting format, with geographical segments as secondary. AS 17 makes the dominant source of risks and returns decide the primary format. Here product differences dominate, so the product-based segments are primary. Geography becomes the primary format only when it is the dominant factor.

  1. ABusiness segments as the primary format and geographical segments as the secondary formatCorrect
  2. BGeographical segments as the primary format and business segments as the secondary format
  3. COnly geographical segments, as business segments need no disclosure
  4. DBoth formats may be treated as primary at the entity's choice

Explanation

AS 17 requires the dominant source and nature of risks and returns to decide the primary format. Here the products drive risks and returns, so business segments are primary and geographical segments are secondary. The reverse treatment applies only when geography is the dominant factor, so option B is wrong.

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