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CA Final · Financial Reporting · Ind AS 108 Operating Segments

Tarang Textiles Ltd reports internally to its CODM by product line (cotton, synthetics, denim). The board of directors, however, receives a second set of reports organised by geographical region. Each product line has a manager who is accountable to the CODM, while regional heads have no direct accountability for results. Under Ind AS 108, how should the operating segments be identified?

The product lines are the operating segments. When the CODM uses more than one set of information, Ind AS 108 looks to factors like the nature of activities, the managers responsible and board information, and product managers are accountable, so only that set is used.

  1. AUsing both sets, so there are product and regional segments together
  2. BUsing the regional set, because the board receives it
  3. CUsing the product set, because factors such as managers responsible for components and the nature of business activities point to it as the single set of operating segmentsCorrect
  4. DUsing neither set, since segments must be determined by geography only

Explanation

Where the CODM uses more than one set of segment information, other factors identify a single set of components, including the nature of business activities, the existence of managers responsible for them, and information presented to the board. Product lines have accountable managers, so they form the segments. The regional set is wrong as regional heads lack responsibility.

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