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CMA Final · Corporate Financial Reporting · Operating Segments (Ind AS 108)

Tirupati Infra Ltd has a corporate headquarters that incurs administrative costs and earns only incidental revenue, such as a small rent from a canteen operator. How should it be treated under Ind AS 108?

The headquarters need not be treated as an operating segment. Ind AS 108 says a corporate headquarters or functional department that earns no revenues, or only incidental revenues, is not an operating segment, so the small canteen rent does not change this.

  1. AIt must be reported as an operating segment because it has some revenue
  2. BIt need not be an operating segment, since a corporate headquarters may earn no revenues or only incidental revenuesCorrect
  3. CIt is an operating segment only if the auditor so decides
  4. DIt becomes the CODM of the entity

Explanation

Paragraph 6 states that not every part of an entity is an operating segment; a corporate headquarters or functional departments may earn no revenues or only incidental revenues and would not be operating segments. Incidental rent therefore does not make it a segment.

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