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CA Final · Financial Reporting · Ind AS 108 Operating Segments

Himalaya Pharma Ltd has a central research and administration department that is managed separately. It earns revenue only by occasionally licensing a small old patent, which is incidental to the company's main activities. The CODM does review the department's costs monthly. The CFO also notes that the company's post-employment benefit plan has its own trustees and assets of Rs 40 crore, and suggests reporting it as a segment. Which conclusion is correct under Ind AS 108?

Neither is an operating segment. Ind AS 108 states that functional departments earning only incidental revenue are not operating segments, and post-employment benefit plans are expressly not operating segments, regardless of CODM cost review or the size of the plan's assets.

  1. ABoth should be segments because the CODM reviews the department and the plan has separate assets
  2. BThe department is a segment because the CODM reviews its costs; the plan is not
  3. CThe department is not an operating segment as its revenue is incidental, and the plan is not an operating segment by the standard's express statementCorrect
  4. DThe plan is a segment because of its Rs 40 crore assets; the department is not

Explanation

Ind AS 108 says that departments that earn no revenue or only incidental revenue are not operating segments, and that post-employment benefit plans are not operating segments. CODM review of costs or the size of plan assets does not change this. The option making the department a segment relies only on the review, which is not sufficient.

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