Throughout this blog series on AS 17 Segment Reporting we have covered all the building blocks — identifying business segments and geographical segments, finding reportable segments using the 10% materiality test and 75% overall test, calculating segment revenue, segment expense, segment assets, and segment liabilities, understanding the primary segment reporting format and secondary segment reporting format, and handling inter segment transfer pricing and other disclosures.
Now it is time to bring everything together. In this final blog we focus entirely on how to actually prepare a segmental report from start to finish. We will walk through the complete step by step process and work through fully solved examples taken directly from study material so you can see exactly how a segmental report format India looks in practice.
This blog is especially useful for exam preparation because questions on segment reporting exam papers almost always require students to prepare a complete segmental report rather than just answer theoretical questions.
Why Preparing a Segmental Report is Important
A segmental report is the final output of the entire AS 17 Segment Reporting process. It is the document that goes into the financial statements and tells users how each part of the enterprise is performing.
Getting the segmental report format India right is important for three reasons:
- First, it ensures compliance with accounting standard 17 which is mandatory for non-SMCs and Level I non-corporate entities.
- Second, it gives investors, analysts, and creditors the segment level information they need to properly assess the risks and returns of a diversified enterprise.
- Third, in segment reporting CA exam questions, preparing a correct and complete segmental report is usually worth the most marks in the question. A student who understands the format and the rules for inclusions and exclusions will score significantly better than one who does not.
Step by Step Process to Prepare a Segmental Report
Before diving into the solved examples, here is the complete step by step process for preparing a segmental report format India under AS 17:
- Step 1 — Identify Business and Geographical Segments Decide what your segments are based on the definitions in AS 17. Use the internal financial reporting structure as the starting point.
- Step 2 — Identify Reportable Segments Apply the 10% materiality test — revenue test, profit and loss test, and asset test — to each segment. Then check the 75% overall test to ensure adequate revenue coverage.
- Step 3 — Calculate Segment Revenue For each reportable segment, calculate segment revenue by adding directly attributable revenue, reasonably allocated enterprise revenue, and inter-segment revenue. Remember to show external and inter-segment revenue separately.
- Step 4 — Calculate Segment Expense For each reportable segment, calculate segment expense by adding directly attributable expenses, reasonably allocated enterprise expenses, and inter-segment expenses. Remember to exclude interest expense, income tax, and general head office expenses.
- Step 5 — Calculate Segment Result Deduct segment expense from segment revenue to get segment result for each reportable segment.
- Step 6 — Calculate Segment Assets and Liabilities Identify and total the operating assets and operating liabilities directly attributable or reasonably allocated to each segment. Remember to exclude income tax assets, income tax liabilities, head office assets, and financing liabilities.
- Step 7 — Prepare the Segmental Report Present all segment figures in a properly formatted table showing each reportable segment in separate columns along with an eliminations column and a consolidated total column.
- Step 8 — Prepare the Reconciliation Reconcile segment revenue to enterprise revenue, segment result to enterprise net profit or loss, segment assets to enterprise assets, and segment liabilities to enterprise liabilities.
- Step 9 — Prepare Secondary Format Disclosures If business segments are primary, prepare geographical secondary disclosures. If geographical segments are primary, prepare business secondary disclosures.
- Step 10 — Make Other Disclosures Disclose segment accounting policies, inter segment transfer pricing basis, composition of each segment, and any changes in policies.
Solved Example 1: Diversifiers Ltd. — Complete Segmental Report
This is the most comprehensive segment reporting example in the study material. Prepare a complete segmental report for Diversifiers Ltd. from the following data:
Forging Shop Division Revenue:
Sales to Bright Bar Division = ₹4,575 thousand
Other Domestic Sales = ₹90 thousand
Export Sales = ₹6,135 thousand
Total = ₹10,800 thousand
Bright Bar Division Revenue:
Sales to Fitting Division = ₹45 thousand
Export Sales to Rwanda = ₹300 thousand
Total = ₹345 thousand
Fitting Division Revenue:
Export Sales to Maldives = ₹270 thousand
Other Data (₹ thousands):
- Pre-tax operating result: Forging Shop 240, Bright Bar 30, Fitting (12)
- Head office cost reallocated: Forging Shop 72, Bright Bar 36, Fitting 36
- Interest costs: Forging Shop 6, Bright Bar 8, Fitting 2
- Fixed assets: Head Office 75, Forging Shop 300, Bright Bar 60, Fitting 180
- Net current assets: Head Office 72, Forging Shop 180, Bright Bar 60, Fitting 135
- Long term liabilities: Head Office 57, Forging Shop 30, Bright Bar 15, Fitting 180
Step 1: Identify Segments
The three divisions — Forging Shop, Bright Bar, and Fitting — are the business segments. The geographical markets — Home, Export by Forging Shop, Rwanda, and Maldives — are the geographical segments for secondary format disclosures.
Step 2: Identify Reportable Segments
Since the data given shows all three divisions, we treat all three as reportable segments for this example.
Step 3 to Step 5: Calculate Segment Revenue and Segment Result
Forging Shop:
External Sales = 90 + 6,135 = ₹6,225 thousand
Inter-Segment Sales = ₹4,575 thousand
Total Segment Revenue = ₹10,800 thousand
Segment Result = ₹240 thousand (given as pre-tax operating result)
Bright Bar:
External Sales = ₹300 thousand
Inter-Segment Sales = ₹45 thousand
Total Segment Revenue = ₹345 thousand
Segment Result = ₹30 thousand
Fitting:
External Sales = ₹270 thousand
Inter-Segment Sales = nil
Total Segment Revenue = ₹270 thousand
Segment Result = ₹(12) thousand
Note: Head office costs of ₹144 thousand (72+36+36) and interest costs of ₹16 thousand (6+8+2) are excluded from segment result because head office costs are enterprise level expenses and interest costs are financing costs — both are excluded under AS 17 solved example rules.
Step 6: Calculate Segment Assets and Liabilities
- Forging Shop Segment Assets = Fixed Assets 300 + Net Current Assets 180 = ₹480 thousand
- Bright Bar Segment Assets = Fixed Assets 60 + Net Current Assets 60 = ₹120 thousand
- Fitting Segment Assets = Fixed Assets 180 + Net Current Assets 135 = ₹315 thousand
- Total Segment Assets = ₹915 thousand
- Unallocated Corporate Assets = Head Office Fixed Assets 75 + Net Current Assets 72 = ₹147 thousand
- Total Enterprise Assets = ₹1,062 thousand
Forging Shop Segment Liabilities = ₹30 thousand
Bright Bar Segment Liabilities = ₹15 thousand
Fitting Segment Liabilities = ₹180 thousand
Total Segment Liabilities = ₹225 thousand
Unallocated Corporate Liabilities = ₹57 thousand
Total Enterprise Liabilities = ₹282 thousand
Step 7: The Complete Segmental Report
Diversifiers Ltd. — Segmental Report (₹ thousands)
Segment Revenue:
- Forging Shop — Domestic 90, Export 6,135, External Sales 6,225, Inter-Segment 4,575, Total 10,800
- Bright Bar — Export Rwanda 300, External Sales 300, Inter-Segment 45, Total 345
- Fitting — Export Maldives 270, External Sales 270, Inter-Segment nil, Total 270
- Inter-Segment Eliminations = (4,620)
- Consolidated Total External Revenue = 6,795
Segment Result:
- Forging Shop = 240
- Bright Bar = 30
- Fitting = (12)
- Total Segment Result = 258
- Less Head Office Expenses = (144)
- Operating Profit = 114
- Less Interest Expense = (16)
- Profit Before Tax = 98
Segment Assets:
- Forging Shop = 480
- Bright Bar = 120
- Fitting = 315
- Total Segment Assets = 915
- Unallocated Corporate Assets = 147
- Total Enterprise Assets = 1,062
Segment Liabilities:
- Forging Shop = 30
- Bright Bar = 15
- Fitting = 180
- Total Segment Liabilities = 225
- Unallocated Corporate Liabilities = 57
- Total Enterprise Liabilities = 282
Step 8: Reconciliation Statement
Segment Revenue 6,795 reconciles to Enterprise Revenue 6,795 — inter-segment sales of 4,620 eliminated in consolidation.
Segment Result 258 reconciles to Profit Before Tax 98 after deducting Head Office Expenses 144 and Interest Expense 16.
Segment Assets 915 plus Unallocated Corporate Assets 147 = Enterprise Assets 1,062.
Segment Liabilities 225 plus Unallocated Corporate Liabilities 57 = Enterprise Liabilities 282.
Step 9: Secondary Format — Sales Revenue by Geographical Market
- Home Sales = ₹90 thousand
- Export Sales by Forging Shop = ₹6,135 thousand
- Export to Rwanda = ₹300 thousand
- Export to Maldives = ₹270 thousand
- Consolidated Total = ₹6,795 thousand
Solved Example 2: Sports Ltd. — Identifying Reportable Segments First
This ICAI segment reporting example tests both identification of reportable segments and preparation of the segmental report. Data for six segments of Sports Ltd. (₹ lakhs):
- Segment M: Assets 40, Result 50, Revenue 300
- Segment N: Assets 80, Result (190), Revenue 620
- Segment O: Assets 30, Result 10, Revenue 80
- Segment P: Assets 20, Result 10, Revenue 60
- Segment Q: Assets 20, Result (10), Revenue 80
- Segment R: Assets 10, Result 30, Revenue 60
- Total: Assets 200, Result (100), Revenue 1,200
Identifying Reportable Segments
- Revenue Test — Threshold = 10% of 1,200 = 120 lakhs
- M (300) ✅, N (620) ✅, O (80) ❌, P (60) ❌, Q (80) ❌, R (60) ❌
- Profit and Loss Test — Total profit = 50+10+10+30 = 100. Total loss = 190+10 = 200. Greater = 200.
- Threshold = 20 lakhs. M (50) ✅, N (190) ✅, O (10) ❌, P (10) ❌, Q (10) ❌, R (30) ✅
Asset Test — Threshold = 10% of 200 = 20 lakhs M (40) ✅, N (80) ✅, O (30) ✅, P (20) ✅, Q (20) ✅, R (10) ❌
All six segments pass at least one test. All are reportable segments.
75% Overall Test: Total external revenue of all reportable segments = 1,200 lakhs 75% of enterprise revenue = 75% of 1,200 = 900 lakhs Since all segments are reportable, 1,200 lakhs is covered which is well above 900 lakhs. The 75% overall test is satisfied.
Key Conclusion for Segment Report
Since all six segments are reportable segments, the segmental report must show all six segments individually with their segment revenue, segment result, and segment assets disclosed separately for each. The Chief Accountant who believed only M and N should be reported was completely wrong under AS 17 solved example rules.
Solved Example 3: AMF Ltd. — Five Segment Analysis
The Senior Accountant of AMF Ltd. gives the following data for five segments (₹ lakhs):
Segment P: Assets 80, Result (190), Revenue 620 Segment Q: Assets 30, Result 10, Revenue 80 Segment R: Assets 20, Result 10, Revenue 60 Segment S: Assets 20, Result (10), Revenue 80 Segment T: Assets 10, Result 30, Revenue 60 Total: Assets 160, Result (150), Revenue 900
The Senior Accountant believes only segment P should be reported. Is he correct?
Applying the Three Tests
Revenue Test — Threshold = 10% of 900 = 90 lakhs P (620) ✅, Q (80) ❌, R (60) ❌, S (80) ❌, T (60) ❌
Profit and Loss Test: Total profit of profitable segments (Q, R, T) = 10+10+30 = 50 lakhs Total loss of loss-making segments (P, S) = 190+10 = 200 lakhs Greater = 200 lakhs. Threshold = 10% of 200 = 20 lakhs
P (190) ✅, Q (10) ❌, R (10) ❌, S (10) ❌, T (30) ✅
Asset Test — Threshold = 10% of 160 = 16 lakhs P (80) ✅, Q (30) ✅, R (20) ✅, S (20) ✅, T (10) ❌
Summary of Results:
Segment P — passes revenue, profit, and asset test — Reportable ✅ Segment Q — passes asset test — Reportable ✅ Segment R — passes asset test — Reportable ✅ Segment S — passes asset test — Reportable ✅ Segment T — passes profit test — Reportable ✅
All five segments are reportable segments. The Senior Accountant was wrong. Only reporting segment P is not sufficient under segment reporting CA exam rules.
75% Overall Test Check
Total external revenue of all reportable segments = 900 lakhs 75% of enterprise revenue = 75% of 900 = 675 lakhs Since all five segments are reportable and cover 900 lakhs, the 75% overall test is more than satisfied.
Solved Example 4: Segment Result Calculation — Manufacturing Organisation
This AS 17 solved example focuses specifically on calculating segment result when both directly attributed and allocated items are involved. Data (figures in ₹):
Segments: A, B, C
Directly attributed revenue: A = 5,00,000, B = 3,00,000, C = 1,00,000, Total = 9,00,000 Enterprise revenue allocated in 5:4:2 ratio: Total = 1,10,000
Revenue from inter-segment transactions: B to A = 1,00,000, B to C = 50,000 C to A = 10,000, C to B = 50,000 A to B = 25,000, A to C = 1,00,000
Operating expenses: A = 3,00,000, B = 1,50,000, C = 75,000, Total = 5,25,000 Enterprise expenses allocated in 5:4:2 ratio: Total = 77,000
Expenses on inter-segment transactions: B to A = 75,000, B to C = 30,000 C to A = 6,000, C to B = 40,000 A to B = 18,000, A to C = 82,000
Segment Revenue Calculation
Segment A: Directly attributed = 5,00,000 Enterprise revenue allocated (5/11 of 1,10,000) = 50,000 Revenue from B = 1,00,000 Revenue from C = 10,000 Total Segment Revenue of A = 6,60,000
Segment B: Directly attributed = 3,00,000 Enterprise revenue allocated (4/11 of 1,10,000) = 40,000 Revenue from C = 50,000 Revenue from A = 25,000 Total Segment Revenue of B = 4,15,000
Segment C: Directly attributed = 1,00,000 Enterprise revenue allocated (2/11 of 1,10,000) = 20,000 Revenue from B = 50,000 Revenue from A = 1,00,000 Total Segment Revenue of C = 2,70,000
Segment Expense Calculation
Segment A: Operating expenses = 3,00,000 Enterprise expenses allocated (5/11 of 77,000) = 35,000 Expenses from B = 75,000 Expenses from C = 6,000 Total Segment Expense of A = 4,16,000
Segment B: Operating expenses = 1,50,000 Enterprise expenses allocated (4/11 of 77,000) = 28,000 Expenses from C = 40,000 Expenses from A = 18,000 Total Segment Expense of B = 2,36,000
Segment C: Operating expenses = 75,000 Enterprise expenses allocated (2/11 of 77,000) = 14,000 Expenses from B = 30,000 Expenses from A = 82,000 Total Segment Expense of C = 2,01,000
Segment Result
Segment A = 6,60,000 minus 4,16,000 = ₹2,44,000 Segment B = 4,15,000 minus 2,36,000 = ₹1,79,000 Segment C = 2,70,000 minus 2,01,000 = ₹69,000 Total Segment Result = ₹4,92,000
Common Mistakes to Avoid in Segment Reporting CA Exam
Based on the solved examples above, here are the most common mistakes students make in segment reporting CA exam questions:
Including head office expenses in segment result — Head office expenses are enterprise level costs and must be excluded from segment result. They appear only in the reconciliation.
Including interest expense in segment result — Interest is a financing cost, not an operating cost. It must be excluded from segment result unless the segment is primarily financial in nature.
Forgetting to remove deferred tax assets — Segment assets exclude income tax assets. Always remove deferred tax assets before the asset test and before reporting segment assets.
Not showing inter-segment revenue separately — Segment revenue must be disclosed separately as external revenue and inter-segment revenue. Showing only a combined figure is incorrect.
Missing the eliminations column — The segmental report format India must include a column for inter-segment eliminations showing how inter-segment sales are removed to arrive at consolidated external revenue.
Not doing the 75% overall test — Many students only do the 10% test and forget to check whether the identified reportable segments cover at least 75% of total enterprise external revenue.
Forgetting unallocated corporate assets and liabilities — Head office assets and liabilities are not segment items. They must be shown separately as unallocated items in the reconciliation and added to segment totals to arrive at enterprise totals.
Quick Reference: What to Include and Exclude in Segmental Report
In Segment Revenue — include directly attributed revenue, allocated enterprise revenue, inter-segment revenue. Exclude extraordinary items, interest income, dividend income, investment gains.
In Segment Expense — include directly attributed expenses, allocated enterprise expenses, inter-segment expenses. Exclude interest expense, income tax, head office expenses, investment losses.
In Segment Assets — include operating assets directly attributable or allocated. Exclude income tax assets, deferred tax assets, head office assets.
In Segment Liabilities — include operating liabilities directly attributable or allocated. Exclude income tax liabilities, deferred tax liabilities, borrowings for financing, head office liabilities.
In Segment Result — segment revenue minus segment expense only. Does not include interest, tax, or head office items.
Frequently Asked Questions
Q1. What is the correct format of a segmental report format India under AS 17?
A complete segmental report format India under AS 17 must have separate columns for each reportable segment, an inter-segment eliminations column, and a consolidated total column. It must show segment revenue split between external and inter-segment, segment result, segment assets, segment liabilities, and a reconciliation to enterprise totals.
Q2. Why is reconciliation important in preparing a segmental report?
Reconciliation ensures that users can trace segment figures back to the overall financial statements. It shows what items — such as head office costs, inter-segment eliminations, and unallocated assets — account for the difference between the sum of segment figures and the enterprise totals. This is a mandatory requirement under AS 17 disclosure requirements.
Q3. How do you treat head office costs when preparing a segmental report?
Head office costs that can be specifically attributed to a segment are included in that segment's expenses. General head office costs that relate to the enterprise as a whole are excluded from all segment figures and shown as a reconciling item between total segment result and enterprise net profit or loss.
Q4. What is the most common error in segment reporting CA exam answers?
The most common errors are including interest expense and head office expenses in segment result, forgetting to remove deferred tax assets from segment assets, not showing inter-segment revenue separately from external revenue, and missing the reconciliation statement.
Q5. Must every segment identified be included in the segmental report?
No. Only reportable segments that pass at least one of the three 10% materiality test criteria must be included. Segments that do not pass any test may be combined and shown as an unallocated reconciling item, unless management chooses to designate them as reportable segments at its discretion.
Q6. How do you handle segments that were reportable last year but not this year?
Under AS 17, a segment that was a reportable segment in the immediately preceding period should continue to be reported in the current period even if it no longer meets the 10% thresholds. This maintains consistency in ICAI segment reporting example presentations across periods.
Q7. Is it possible to have more than one primary format in a segmental report?
No. An enterprise can have only one primary format — either business segments or geographical segments — based on the dominant source of its risks and returns. The other type forms the secondary format with limited disclosures.
Conclusion
Preparing a complete and accurate segmental report under AS 17 requires bringing together everything covered across all seven blogs in this series — identifying the right segments, applying the threshold tests correctly, calculating segment revenue, segment expense, segment result, segment assets, and segment liabilities with the correct inclusions and exclusions, presenting the report in the right segmental report format India, preparing the reconciliation, and making all required secondary and other disclosures.
The key to getting full marks in segment reporting exam questions is understanding the logic behind every inclusion and exclusion. Once you understand why head office costs, interest, and income tax are excluded from segment figures, you will never make the mistake of including them. Once you understand what the reconciliation is trying to show, you will always remember to prepare it.
Practice the four segment reporting example problems in this blog multiple times until you can prepare the complete segmental report confidently and quickly. These examples cover all the variations that typically appear in exams — from simple three-segment reports to complex problems involving deferred tax, mixed profits and losses, and multiple geographical markets.
With this final blog, our complete seven-part series on AS 17 Segment Reporting is now complete. From basic definitions to complex practical problems, you now have everything you need to understand, apply, and present segment reporting information confidently in both your exams and in professional practice.
