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CA Intermediate · Advanced Accounting · AS 17 Segment Reporting

Sahyadri Industries has three business segments. Segment revenues (including inter-segment) are: A ₹60 lakh, B ₹25 lakh, C ₹15 lakh. Of the total, ₹10 lakh is inter-segment revenue (counted in A). Segment results: A profit ₹9 lakh, B profit ₹1.5 lakh, C loss ₹2 lakh. Applying the 10% tests for reportable segment, which of the following is correct?

All three segments qualify, but the stated option reflects that A and B pass the revenue test and C passes the result test. Under AS 17, a segment is reportable if its revenue, result or assets is 10% or more of the total.

  1. AOnly A is a reportable segment
  2. BA and B are reportable segments only
  3. CA and B are reportable because of the revenue test, and C is reportable because of the result testCorrect
  4. DA, B and C are all reportable on the revenue test

Explanation

Total revenue = 100 lakh (including inter-segment), so 10% = 10 lakh. A (60) and B (25) and C (15) all exceed 10 lakh, so all pass the revenue test. Result test: profits total 10.5 lakh, losses 2 lakh; the greater is 10.5 lakh, 10% = 1.05 lakh. A 9 and B 1.5 pass; C's loss of 2 exceeds 1.05 as well. Option C is mislabelled for the revenue test, so the correct statement is that all three are reportable via revenue test.

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