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ARTICLE
nomic decision. That means if the CODM practically proach. So, an endeavor is now to be made to examine
taken this risk-return approach for taking their deci- the validity of these major criticisms. Ind AS 108 intro-
sions, then obviously the identified operating seg- duces the management approach to segment reporting in
ments should be the same as before. India. This approach is unfamiliar to many companies and
managers will have to think carefully about the implica-
There may be diversity between the amounts dis- tion of the existing management structure.
closed in the segment report with those reflected in
the entity's primary financial statement as Ind AS al- Due to this management discretion, the comparability of
lows to measure the segment information in the line information across entities will be lost. It does not define
with the internal report. measurement of segment revenue, expenses, result, as-
sets and liabilities. That's why the management can mea-
Diversity in reporting again may be increased due to sure the various segment disclosures in his/her own way
non-defining the terms like segment Revenue, Seg- which may not be consistent enough. There is less direct
ment Expenses, Segment Result, Segment Assets and focus on products or geographical factors which are most
Segment Liabilities. useful segment information for investors, unless they are
used for internal reporting; this is also a great cause of
Although it allows to use the same basis of measure- diversity in reporting.
ment, which has used for internal report, to measure
the segment information; but to maintain the under- The information available internally in companies is often
standability, it has asked to disclose an explanation of more informative than the information reported in the
how the segment information has measured and also financial reports. So, the segment reporting should be
to give a reconciliation for these information with that based on internal reporting practice that leads to high
of the entity. competitive disadvantages. It will be harder to justify dis-
closing segment information particularly for the single seg-
Although Ind AS 108 allows to identify the operating ment entities. When entity use their own measures in the
segments based on internal report and not prescribed segment reporting might be hard to understand and it
to identify the segment as business segment or geo- leads to deprive in the overall quality of the information.
graphical segment but it has asked to give descriptive
information about how it has determined its operat- A risk under this management approach is that, compa-
ing segments. nies may continue to misuse the aggregation criteria to
give less detail segment disclosures. As a results the dis-
Additional line items such as interest revenue and in- closed segment information may be insufficient to the us-
terest expenses are required to disclose if such infor- ers for taking any economic decision.
mation are provided in internal report to the CODM.
But these forgoing criticisms may be countered if we con-
In contrast to AS 17, Ind AS 108 requires to disclose sider some unique prosperity of this new approach. The
some specified information regarding the customer Ind AS 108 focuses on the information that management
who contribute 10% or more of the entity's total rev- believe is important and should therefore provide more
enue, regardless of whether that information is used meaningful segment information. The standard has not
by management in their operating decision making specified any defined measure of profit and loss but al-
report or not. lowed the use of non-Ind AS compliant data, if this is used
in internal reports; this would lead to less comparative
Ind AS 108 requires the information about the pro- disadvantages. It is exactly in the line of IFRS 8 for ensur-
duction or services and the countries in which it earns ing the global harmonization, so the reporting entities do
revenue and holds assets which leads to a detail re- not have to prepare for more than one set of information
porting. for different regions.
Evaluation
Several arguments against the management approach
have been put forward. But question may arise on the
validity of such criticisms against this management ap-
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