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CA Final · Financial Reporting · Ind AS 108 Operating Segments

Veda Industries Ltd has a corporate headquarters that incurs administrative costs and earns no revenue. It also has a defined benefit post-employment plan for its employees. While identifying operating segments under Ind AS 108, which treatment is correct?

A corporate headquarters that earns no revenue is not an operating segment, and the standard expressly says post-employment benefit plans are never operating segments. Not every part of an entity qualifies; only components earning revenues and incurring expenses count, so neither item here is reported as a segment.

  1. AThe headquarters is an operating segment because it incurs significant costs
  2. BNeither the corporate headquarters (earning no revenue) nor the post-employment benefit plan is treated as an operating segmentCorrect
  3. CThe post-employment benefit plan is an operating segment because it has separate financial information
  4. DBoth are operating segments if the CODM reviews their results

Explanation

Ind AS 108 states that not every part of an entity is an operating segment. A corporate headquarters or functional departments that earn no revenue, or only incidental revenue, are not operating segments. An entity's post-employment benefit plans are expressly not operating segments. Option A is wrong because incurring costs alone does not make a component a segment.

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