Internal financial reporting system can be the basis for identifying the segments.A reportable segment arises if b. Segment result, whether profit or loss, is 10% or more of i. combined result of all segments in profit orii. combined result of all segments in loss whichever is greater in absolute amount; orc. Segment assets are 10% or more of all the assets of all the segments.Segment result is segment revenue less segment expensesSegment assets are those operating assets identified with activities of the segmentSegment liabilities are those identified with the segment arising out of its operations.When primary format is based on geographical segments, certain further disclosures are required.Disclosures are also required relating to intra-segment transfers and composition of the segment.Changes in accounting policies that have an effect on the segment reporting should be disclosed.Matrix form of presentation is allowed.
Points For Consideration Under AS 18: Related Party Disclosures
A reportable segment is business segment or a geographical segment identified on the basis of foregoing definitions for which segment information is required to be disclosed as per this standard.Dominant source and nature of risk and returns of an enterprise should govern whether its primaryreporting format will be business segments or geographical segments.a. Revenue from sales to external customers and from transactions with other segments exceeds10% of total revenues (external and internal) of all segments; orIf total external revenue attributable to reportable segments constitutes less than 75% of totalrevenues then additional segments should be identified till 75% level is reached.Segment revenue is the aggregate of revenue that are directly attributable to the segment,enterprises income that can be reasonably allocated to a segment, revenues arising fromtransactions with other segments but does not include extra ordinary items. Interest or dividendincome, profit on sale of investments, are not considered as part of segment unless the enterprise’sactivity are primarily of a financial nature.Segment expenses is the aggregate of expenses resulting from the operating activities of thesegment and enterprise expenses that can be reasonably allocated to the segment but does notinclude income tax, extra ordinary items and general administrative expenses of head office.Interest paid, Loss on sale of investments, are not considered as part of segment unless theenterprise’s activity are primarily of a financial natureUnder primary reporting format for each reportable segment the enterprise should disclose externaland internal segment revenue, segment result, amount of segment assets and liabilities, cost of fixed assets acquired, depreciation, amortization of assets and other non cash expenses.Reconciliation between information about reportable segments and information in financialstatements of the enterprise should be provided.Secondary segment information is required to be disclosed. This includes information aboutrevenues, assets and cost of fixed assets acquired.