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CA Final · Financial Reporting · Ind AS 108 Operating Segments

Veda Industries Ltd has a corporate headquarters that houses the CFO's office, legal and secretarial departments. The headquarters earns no revenue except occasional rent of a small unused floor, which is incidental to the company's activities. The company also runs a post-employment gratuity benefit plan. Under Ind AS 108, how should these be treated?

Neither is an operating segment. Ind AS 108 says a corporate headquarters or functional departments earning no revenue, or only incidental revenue, are not operating segments, and an entity's post-employment benefit plans are never operating segments.

  1. AThe headquarters and the gratuity plan are both operating segments because they incur expenses
  2. BThe headquarters is an operating segment but the gratuity plan is not
  3. CThe headquarters is not an operating segment, and the post-employment benefit plan is not an operating segmentCorrect
  4. DThe gratuity plan is an operating segment but the headquarters is not

Explanation

Ind AS 108 states that not every part of an entity is necessarily an operating segment. A corporate headquarters or functional departments that earn no revenue, or only incidental revenue, are not operating segments. The standard also says that post-employment benefit plans are not operating segments. Options treating either as a segment ignore these statements.

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