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CA Intermediate · Advanced Accounting · AS 17 Segment Reporting

Vihaan Textiles Ltd reports business segments under AS 17. For its Fabrics segment, the data (₹ in lakh) are: sales to external customers 80, transfers to the Garments segment at agreed transfer prices 20, operating expenses directly attributable to the segment 70, interest on the company's general borrowings 5, income tax expense 4, and head office general administrative expenses not allocable to any segment 6. The segment is not a financial enterprise segment. What segment result should be reported for Fabrics?

The Fabrics segment result is ₹30 lakh. Segment revenue includes inter-segment transfers (80 + 20 = 100), and only directly attributable operating expenses of 70 are deducted. Interest on general borrowings, income tax and unallocable head office expenses are excluded from segment expense under AS 17.

  1. A₹30 lakhCorrect
  2. B₹25 lakh
  3. C₹10 lakh
  4. D₹15 lakh

Explanation

Segment revenue includes inter-segment transfers: 80 + 20 = 100. Segment expense excludes interest on general borrowings, income tax and unallocable corporate expenses, so only the 70 of operating expenses is deducted. Segment result = 100 - 70 = 30. Deducting interest gives 25, omitting inter-segment revenue gives 10, and deducting every item gives 15, all of which are wrong.

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