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CA Final · Financial Reporting · Ind AS 108 Operating Segments

Himalaya Textiles Ltd has a corporate headquarters that incurs administrative costs and earns only incidental interest income from staff loans. The company also runs a post-employment gratuity benefit plan through a separate trust. Under Ind AS 108, how should these be treated for identifying operating segments?

Neither is an operating segment. A corporate headquarters that earns no revenue or only incidental revenue is not an operating segment, and Ind AS 108 expressly says an entity's post-employment benefit plans are not operating segments, regardless of the costs they incur.

  1. ABoth the corporate headquarters and the gratuity plan are operating segments because they incur expenses
  2. BThe corporate headquarters is an operating segment but the gratuity plan is not
  3. CThe gratuity plan is an operating segment but the corporate headquarters is not
  4. DNeither is necessarily an operating segment; a headquarters earning no or only incidental revenue is not one, and post-employment benefit plans are not operating segmentsCorrect

Explanation

Ind AS 108 states that not every part of an entity is an operating segment. A corporate headquarters or functional departments that earn no revenue or only incidental revenue are not operating segments. An entity's post-employment benefit plans are expressly not operating segments. The option treating the headquarters as a segment ignores the incidental-revenue point.

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