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

Vistara Pharma Ltd has a corporate head office department that performs treasury and administrative functions and earns only incidental interest income from group deposits. The CODM reviews it only as an unallocated cost centre. Under Ind AS 108, how should it be treated?

The head office is not an operating segment. Ind AS 108 says a corporate headquarters or functional department that earns no revenue, or only incidental revenue, would not be an operating segment, so it is treated as an unallocated corporate item.

  1. AAs an operating segment, because every department that earns any revenue is a segment
  2. BAs an operating segment, because it has a manager responsible for it
  3. CAs not necessarily an operating segment, since a corporate headquarters earning only incidental revenue would not be oneCorrect
  4. DAs a segment only if the statutory auditor approves

Explanation

Paragraph 6 states that not every part of an entity is an operating segment. A corporate headquarters or functional departments that earn no revenue, or revenue only incidental to the entity's activities, would not be operating segments. Having a manager or earning any revenue does not by itself make it a segment.

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