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AS 17 Segment Reporting | Company Vakil

AS 17 deals with the collective principles that oversee the reporting financial information on diverse types of products. The accounting standard helps readers grasp the well-being of the enterprise, assess the risks involved, and make better informed decisions about the enterprise as a whole.

How it applies

  1. Accounting standard 17 has a broad scope that should be used to present general purpose financial statements.
  2. Any requirements of the standard are also applicable for consolidated financial statements.
  3. Any enterprise must abide by the rules and requirements of the standard in full

Definition of terms

For this accounting standard, the meanings are defined as follows:

Business segment— A part of an enterprise that is committed to providing a product or products different from ones in other business segments.

Geographical segment— part of an enterprise subject to risks and returns that differ from components in other economic environments. In this type of segment, the factors that need to be identified are:

  1. Economic and political similarities
  2. Relations between the operations in separate geographical areas
  3. Closeness of operations
  4. Risks attached to operations in a certain region
  5. Currency risks
  6. Exchange control regulations

Reportable segment— Business segment or geographical segment foregoes any definitions which AS 17 requires to be disclosed

Enterprise revenue— Revenue created from sales to customers that is reported in the statement of profit and loss

Segment revenue— Revenue that is the combination of the following:

  1. A part of the enterprise revenue that can be directly tied to a segment
  2. A part of the enterprise revenue that may be allocated to a segment
  3. Any revenue derived from transactions with separate segments of the enterprise

Segment revenue, however, does not include the following:

  1. Outstanding items as described in AS 5, Prior Period Items and Changes in Accounting Policies, and Net Profit or Loss for the Period
  2. Interest gained on the advances or loans to other segments, and the interest or the dividend income
  3. Any financial gains on the sales of investments or on the cessation of debt, except if operations of the segment are financial

Segment expense— Expenses that are a combination of the following:

  1. Expenses coming from the operating activities of a segment
  2. The part of the enterprise expense which can be allocated on a reasonable basis to the segment

Segment expense does not include:

  1. Outstanding items listed in AS 5, Prior Period Items and Charges in Accounting Policies, or Net Profit or Loss for the Period

The main risks affect how an enterprise is managed. Because of this, an enterprise’s organizational structure is the standard and identifying segments.

Segment revenue, assets, liabilities and expense are determined before intra-enterprise balances and transactions are taken out. This is part of the process of preparing those financial statements.

In accounting standard 17, the fundamental accounting policies are those used to prepare financial statements.

According to AS 17, when an enterprise’s risks and returns are affected by which products and services are produced, enterprises should report segment information in its primary format, and report secondary information geographically.

 

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