Page 9 - 25. COMPILER QB - IND AS 108

Discuss, which of the segments would be reportable under the threshold criteria identified in Ind AS 108 and
why?

SOLUTION
Threshold amount of 10% of total revenue is Rs. 1,28,000 (Rs. 12,80,000 × 10%).
Segment A exceeds the quantitative threshold (Rs. 4,00,000 > Rs. 1,28,000) and hence is a reportable

segment.
Segment D exceeds the quantitative threshold (Rs. 6,90,000 > Rs. 1,28,000) and hence is a 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 73.44% (Rs.
4,70,000 / 6,40,000 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 John Limited, it is given that Segment C is a high growing business 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, John Limited may designate segment C as a reportable segment, making the total
external revenue attributable to reportable segments be 87.5% (Rs. 5,60,000/ 6,40,000 x 100) of total entity’s
external revenue.

In this situation, Segments A, C and D will be reportable segments and Segment B will be shown as other
segments.
Alternatively, Segment B may be considered as a reportable segment instead of Segment C, based on the
choice of John Ltd. ‘s management, if it meets the definition of operating segment.
If Segment B is considered as reportable segment, external revenue reported will be
Rs 4,00,000 + Rs 80,000 + Rs 70,000 = Rs 5,50,000

% of Total External Revenue = Rs 5,50,000 / Rs 6,40,000 = 85.94%
Segments A, B and D will be reportable segments and Segment C will be shown as other segments.

Q7 (January 21 – 6 Marks)

Heavy Goods Ltd. has 6 operating segments namely L-Q (below). The total revenues (internal and external),
profits or losses and assets are set out below:
(In Rs.)

Segment Inter Segment Sales External Sales Profit / loss Total assets
L 4,200 12,300 3,000 37,500
M 3,500 7,750 1,500 23,250
N 1,000 3,500 (1,500) 15,750
0 0 5,250 (750) 10,500
P 500 5,500 900 10,500
Q 1,200 1,050 600 5,250
10,400 35,350 3,750 1,02,750

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