Skip to content

CA Intermediate · Advanced Accounting · Applicability of Accounting Standards

Nirmal Pharma Ltd is a Level I-eligible company by turnover. During the year its tax year fiscal data are: it has three reportable business segments identified by AS 17 criteria. Segment revenue (including inter-segment) are A Rs 60 lakh, B Rs 25 lakh, C Rs 15 lakh, total Rs 100 lakh. Segment results are A profit Rs 9 lakh, B profit Rs 3 lakh, C loss Rs 2 lakh. Segment assets A Rs 50 lakh, B Rs 30 lakh, C Rs 20 lakh. Under the 10% thresholds of AS 17, which segments are reportable?

All three segments are reportable. AS 17 requires that a segment meeting any one 10% test be reported. Here revenue of each segment exceeds Rs 10 lakh, and each segment result exceeds 10% of the greater of combined profit Rs 12 lakh or combined loss Rs 2 lakh. Assets also exceed Rs 10 lakh.

  1. AA only
  2. BA and B only
  3. CA, B and C, since C's revenue is 15% and its absolute result is 2 lakh against the 10% test on greater of profit or lossCorrect
  4. DA and C only

Explanation

Revenue test: 10% of Rs 100 lakh = Rs 10 lakh; A, B and C (15) all pass. Result test: combined profit segments = 12, combined loss = 2; the greater is 12, 10% = 1.2 lakh; A, B and C (2 loss) all exceed it. Asset test 10% = 10 lakh; all pass. Only one test needs to be met, so all three are reportable.

Did you get it right without looking?

One question tells you little. A timed set on Applicability of Accounting Standards shows your real accuracy, how long you take and where you lose marks.

Practise Applicability of Accounting StandardsFree diagnostic mock

More Applicability of Accounting Standards questions