Page 4 - 25. COMPILER QB - IND AS 108

MTPs QUESTIONS

Q3 (October 19 – 5 Marks)

X Ltd. has identified 4 operating segments for which revenue data is given below:
External Sale (Rs.) Internal Sale (Rs.) Total (Rs.)
Segment A 30,00,000 Nil 30,00,000

Segment B 6,50,000 Nil 6,50,000
Segment C 8,50,000 1,00,000 9,50,000
Segment D 5,00,000 49,00,000 54,00,000
Total Sales 50,00,000 50,00,000 1,00,00,000
Additional information:
Segment C is a new business unit and management expects this segment to make a significant contribution
to external revenue in coming years.
Which of the segments would be reportable under the criteria identified in Ind AS 108?

SOLUTION
Threshold amount is Rs. 10,00,000 (Rs. 1,00,00,000 x 10%).

Segment A exceeds the quantitative threshold (Rs. 30,00,000 > Rs. 10,00,000) and hence reportable segment.
Segment D exceeds the quantitative threshold (Rs. 54,00,000 > Rs. 10,00,000) and hence reportable segment.
Segment B & C do not meet the quantitative threshold amount and may not be classified as a reportable
segment.
However, the total external revenue generated by these two segments A & D represent only 70% (Rs.

35,00,000 / 50,00,000 x 100) of the entity’s total external revenue. If the total external revenue reported by
operating segments constitutes less than 75% of the entity's total external revenue, additional operating
segments should be identified as reportable segments until at least 75% of the revenue is included in
reportable segments.
In the case of X Ltd., it is given that Segment C is a new business unit and management expects this

segment to make a significant contribution to external revenue in coming years. In accordance with the
requirement of Ind AS 108, X Ltd. designates this start-up segment C as a reportable segment, making the
total external revenue attributable to reportable segments 87% (Rs. 43,50,000 / 50,00,000 x 100) of total
entity revenues.
Note:
In this situation, Segments A, C and D will be reportable segments and Segment B will be shown as other

segments.
Alternatively, segment B can be considered as a reportable segment as well as it meets the definition of
operating segment. If Segment B is considered as reportable segment:
External revenue reported: ₹30,00,000 + ₹6,50,000 + ₹5,00,000 = ₹41,50,000

% of Total External Revenue = ₹41,50,000 / ₹50,00,000 = 83%
Accordingly, Segments A, B and D will be reportable segments and Segment C will be shown as other
segments.

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