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CA Final · Financial Reporting · Ind AS 108 Operating Segments

Sagar Enterprises Ltd presents internal reports to its CODM in two ways: one by product lines (each with a dedicated segment manager) and another by geographical regions (managed by regional coordinators without segment accountability). The board is presented with the product-line information. How should the entity identify its operating segments?

Sagar should treat product lines as its operating segments. When the CODM uses more than one set of information, Ind AS 108 looks to the nature of activities, responsible managers and information presented to the board, all of which favour product lines here.

  1. AUse the geographical set, since regions are always the primary basis
  2. BReport both sets as operating segments in full
  3. CUse other factors such as nature of business activities, existence of responsible managers and information presented to the board, pointing to product linesCorrect
  4. DChoose the set that gives the larger number of segments

Explanation

Where the CODM uses more than one set of segment information, Ind AS 108 says other factors identify the single set: the nature of business activities of each component, existence of managers responsible for them, and information presented to the board. Here all three point to product lines, so geographical regions are not the operating segments.

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