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CA Final · Financial Reporting · Ind AS 108 Operating Segments

Veda Industries Ltd has a corporate headquarters that houses the finance, legal and secretarial functions. The headquarters earns only a small amount of incidental income from sub-letting a floor to a tenant. The entity also has a post-employment benefit plan for its employees. Under Ind AS 108, how should these be treated for segment identification?

A corporate headquarters earning only incidental revenue is not necessarily an operating segment, and Ind AS 108 expressly says an entity's post-employment benefit plans are not operating segments. So neither item is treated as an operating segment in this case.

  1. ANeither the headquarters nor the post-employment benefit plan is necessarily an operating segment; the plan is expressly not an operating segmentCorrect
  2. BThe headquarters is an operating segment because it incurs significant expenses, while the post-employment benefit plan is not
  3. CBoth the headquarters and the post-employment benefit plan are operating segments if the CODM reviews their results
  4. DThe post-employment benefit 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 would not be operating segments. The entity's post-employment benefit plans are expressly not operating segments. The option treating the headquarters as a segment fails because incidental revenue does not qualify it.

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