IFRS- 8 OPERATING SEGEMENT Segment reporting under International Financial Reporting Standards (IFRSs) (IFRS 8 Operating Segments) Meaning

ng & Objective An enterprise deals in multiple product/ services and operates in different geographical areas. Multiple products / services and its operations in different geographical areas are exposed to different risk and return. Information about multiple products / service and its operation in different geographical areas is called Segment information. Such information is used to assess the risk and return of multiple products/ services and its operation in different geographical areas. Disclosure of such information is called segment reporting. Segment reporting helps users of financial statement. - To better understand the performance of the enterprise - To better assess the Risk and Returns of the enterprise - To make more informed judgments about the enterprise as whole. Accounting is mandatory in the following cases: Enterprise whose equity or debt instrument is listed in India or outside India Enterprise whose equity or debt instrument is the process listing in India or outside India Banks including Co-operative banks Financial Institutions Insurance companies All commercial and business reporting enterprises having turnover exceeding Rs. 50 Crores. All commercial and business reporting enterprises having borrowings including public deposits in excess of Rs. 10 Crore at any time during the accounting period. Holding and subsidiary companies of above. Segment There are two types of segments Business Segment- Segment is made on the basis of product / services, which are exposed to different risks and returns. A business segment is component of an enterprise, which satisfies the following conditions It is distinguishable component of an enterprise, It is engaged in providing an individual product or service or group of related products or services, and It is subject to risks and returns that are different from those of other business segment. Factors that should be considered in determining whether products or services are related include: - The nature of products or services; - The nature of the production processes: 1

The methods used to distribute the products or provide the services and If applicable the nature of the regulatory environment, i.e.. Banking insurance or public utilities. Example : Segments can be categorised based on the line of business a company is into. This is called reporting based on business segments. Take Hindustan Unilever. The company is divided its segments based on the products it offers to customers. They are: Soaps and detergents, personal products, beverages, foods, including culinary and branded staples, ice-creams, exports, and others, including chemicals and agri-product Example : Based on the guiding principles given in Accounting Standard on Segment Reporting (AS-17), the NESTLE primary business segment is Food. The food business incorporates product groups viz. Milk Products and Nutrition, Beverages, Prepared dishes and cooking aids, Chocolatesand Confectionery, which mainly have similar risks and returns. As the Companys business activity falls within a single primary business segment the disclosure requirements of AS -17 in this regard are not applicable.

Example : Omax auto:The company is primarily engaged in the business of Auto Components for Two Wheeler and Four wheeler industry, which are governed by the same set of risk and returns. As the companys business activity falls within a single primary business segment, the disclosure requirements of Accounting Standard ( AS-17) Segment Reporting issued by The Institute of Chartered Accountants of India are not applicable. Exports being less than 10%, Geographical segment reporting is also notrequired. Geographical segment- Segment is made on the basis of its operation in different geographical areas, which are exposed to different Risks and Return. A geographical segment is a component of an enterprise, which satisfies the following conditions: It is distinguishable component of an enterprise; It is engaged in providing products or services within a particular economic environment. The risks and return of an enterprise are influenced both by the geographical location of its operations (where its products are products or where its services rendering activities are based) and also by the location of its customers (where its products are sold or services are rendered). The definition allows geographical segment to be based on either: - The location of production or service facilities and other assets of an enterprise; or - The location of its customers. In process of identifying the predominant source of risk and returns of the company, internal organization and management structure of company and system of internal reporting to Board of Directors and chief executive officer provide the best evidence of predominant source of risks and return of the company. So, the reportable segment may be either a Business segment or Geographical segment. Example : TCS identifies its revenues based on continents from which it earns. Therefore its Geographic segments are Americas, Europe, India and others. ISSUES

What about a business that has a single product line or does not operate in different regions? These companies usually make a disclosure in their annual report stating that, though the standard is applicable to them, there is only one segment that can be reported that year. Classic example is the automobiles industry. Maruti Suzuki, in its annual report, says that the only reportable and primary segment is the passenger cars. NTPC and Hexaware may be a few more under this category.

SEGMENT REPORTING FOR THE QUARTER / FULL YEAR ENDED 31ST MARCH, 2010 of BANK OF BARODA

Part A: Business Segments Quarter Ended 31.03.10 Audited Quarter Ended 31.03.09 Reviewed Year Ended 31.03.10 Audited

Rs. in lacs Year Ended 31.03.09 Audited

Sr. No.

Particulars

Segment Revenue (a) Treasury Operations (b) Wholesale Banking (c) Retail Banking (d) Other Banking Operations Total Revenue 117941 190082 143536 68659 520218 118779 134717 162978 82767 499241 459916 732424 495691 262439 1950470 444229 524737 538310 277648 1784924

Segment Results (a) Treasury Operations (b) Wholesale Banking (c) Retail Banking (d) Other Banking Operations Total Unallocated expenditure Profit before Tax Provision for Tax Net Profit 18784 53859 22560 77564 172767 47622 125145 34517 90628 38133 35950 9471 65907 149461 39987 109474 34205 75269 104770 158536 77865 273242 614413 190607 423806 117973 305833 101957 84522 140650 176939 504068 169774 334294 111574 222720

Capital Employed (a) Treasury Operations (b) Wholesale Banking (c) Retail Banking (d) Other Banking Operations (e) Unallocated Total Capital Employed 377089 473105 244292 403346 12806 1510638 347080 322525 280224 317306 16419 1283554 377089 473105 244292 403346 12806 1510638 347080 322525 280224 317306 16419 1283554

#Total revenue of "Other Banking Operations" is exclusive of inter segment revenue which is Rs.339989 lacs for the QE Dec-09 (Rs.293800 lacs for QE Dec-08).

Part- B : Geographic Segments Quarter Ended 31.12.09 Reviewed Quarter Ended 31.12.08 Reviewed Nine Months Ended 31.12.09 Reviewed Nine Months Ended 31.12.08 Reviewed

Rs. in lacs Year Ended 31.03.09 Audited

Sr. No.

Particulars

Revenue (a) Domestic (b) International Total 422375 61287 483662 433136 69220 502356 1243757 186495 1430252 1112214 173468 1285682 1546520 238404 1784924

Assets (a) Domestic (b) International Total 18934276 6101122 25035398 15981096 4036204 20017300 18934276 6101122 25035398 15981096 4036204 20017300 17710626 5030047 22740673

Notes on Segment Reporting: 1. As per guidelines of RBI on compliance with Accounting Standards, Bank has adopted "Treasury Operations", Wholesale, ", Retail and "Other Banking Operations" as Primary business segments and "Domestic" and "International" "Domestic" and "International" as secondary / geographic segments for the purpose of compliance with AS-17 on Segment Reporting issued by ICAI. In determining the segment results, the funds transfer price mechanism followed by the bank has been used. Segment revenue represents revenue from external customers. Capital employed for each segment has been allocated proportionate to the assets of the segment.

2. 3. 4.

Segment wise Revenue, Results and Capital Employed for the Quarter ended 31st March, 2007 OF NRE COKE LTD
(Rs. in crores)

S.N.

PARTICULARS

QUARTER ENDED 31.03.2007

YEAR ENDED 31.03.2007

1. Segment Revenue (Net Sale/Income from Segment)

a) Coke Division b) Steel Division c) Unallocated

132.41 44.62 9.64 186.67

385.46 124.42 24.68

Net Sales/ Income from Operations 2. Segment Results

a) Coke Division b) Steel Division c) Unallocated Total Less : Interest Profit/(Loss) Before Tax & Interest

534.56

61.89 2.97 2.92 67.78 7.33

87.36 4.03 7.05

98.44
23.69

Total Profit/ (Loss) Before Tax 3. Capital Employed

a) Coke Division (including captive windmills of Rs.9.84 crores ) b) Steel Division (including captive windmills of Rs.115.97 crores) c) Unallocated / Others

60.45

74.75

372.26 211.84 831.64 1,415.74

372.26 211.84
831.64

Total

1,415.74

Reportable segment is a business segment or a geographical segment identified on the basis of their definitions for which segment information is required to be disclosed by the statement. Business segment or geographical segment which has been identified as reportable segment shall be further dividend to include sub-segments based on the following conditions: If the total Revenue ( external customers and intersegment ) of a segment is 10% or more of all revenue of all segments Or 10% or more of segment result (Segment result means: if some segments are in loss then total of loss of all loss-making segments or if some segment are in profit total profit of all profit-making segments. Whichever is higher i.e. total profit or total loss figure in absolute term.) Or Segment asset is 10% or more than total assets of all segments All the above three criteria must be applied first andEven if

-Further, Management may at its discretion choose any segment as reportable segment such segment does not fulfill the criteria stated above -

Ensure whether at least 75% of total external revenue should be in the reportable segment. If 75% of total external revenue is not in the reportable segment, then additional reportable segment should be identified ignoring 10% threshold limits until at least 75% of total external revenue is included in reportable segment.

Note: Any segment, which was reportable segment in the previous year on the fulfillment of 10% threshold limit, should be reportable segment during current year even if 10% threshold limit in current year is not fulfilled. Example1: Identify the reportable segments and reconciling segment from the following details of Induga Ltd. 5

REPORTABLE SEGMENTS S T U V W

Total Total (Segment) (Enterprise)

1.Segment Revenue (a) External Sales 255 15 10 15 50 20 35 400 . (b) Inter-Segment 100 60 30 5 5 200 . Sales . . . . . . . . . . (c) Total revenue 100 315 45 15 15 50 25 35 600 400 2. Total revenue of 16.7 52.5 7.5 2.5 2.5 8.3 4.2 5.8 each segment as a percentage of total revenue of all segments 3. Segment Result 5 (90) 15 (5) 8 (5) 5 7 [Profit / Loss] 4. Combined Result of 5 15 8 5 7 40 all segment in profit 5. Combined result of (90) (5) (5) (100) all segment in loss 6.Segment result as a 5 90 15 5 8 5 5 7 percentage of the greater of the total arrived at 4 and 5 above in absolute amount (i.e., 100) 7. Segment Assets 15 47 5 11 3 5 5 9 100 8. Segment assets as a 15 47 5 11 3 5 5 9 percentage of total percentage of total assets of all segment Solution Steps for identification of sub-segments: (a) 10% of total revenue- S (16.7%); T (52.5%) identified in term of sales criteria. (b) 10% of absolute figure of profit (40) or loss (100) segment T (90%) and U (15%) identified on the basis of 10% of profit or loss. (c) 10% of segment assets- segment S (15%); T (47%); V (11%) identified on the basis of asset. (d) It is presumed that segment W is chosen by management. (e) Now segment are S, T, U, V, W as identified in steps 1 to 4. But external sales revenue of these segments only 73.75% (0+63.75+3.75+2.5+3.75=73.75%) (f) X is chosen as segment to make it 75% based on assets and asset and profit. Thus segments S, T, V, U, W and X are reportable segment. 6

Q2: Following is the data regarding six segments of Z Ltd. . Particulars A B Segment Revenue 180 390 Segment Result 45 (105) Segment Assets 20 40 Q3: Following is the data regarding six segments of Z Ltd. . Particulars A B Segment Revenue 200 450 Segment Result 65 (110) Segment Assets 60 80

(RS IN LACS) C 40 5 11 D 30 5 8 E 40 (5) 9 F 30 15 8

(RS IN LACS) C 60 10 10 D 50 5 10 E 60 (20) 8 F 60 25 8

Reportable Segments In addition, segments should be identified as primary and secondary segments. The dominant source and nature of risks and returns of an enterprise will decide whether its segment report should provide business or geographical segments If the risks and returns of an enterprise are affected predominantly by differences in the products and services it produces, its primary format for reporting should be business segments. The report on geographic segment will be secondary. The segment report should contain information on both primary and secondary segments. Invariably, the popular choice for primary reporting will be the business segment.

Reportable segment are classified in following two parts for the purpose of disclosure: Primary Reportable Segment. Secondary Reportable Segment Disclosure The disclosure requirements of primary segments are as under: Revenue from external customers. Revenue from transaction with other segment Segment Asset Segment liabilities Segment result. Capital expenditure incurred during the year Depreciation and amortization expenses. Non- Cash expenses other than depreciation and amortization (for eg provision for bad and doubtful debts, loss on sale of asset, writing of inventories to net realisable value) ``zA