AS 17 – Segment Reporting tells companies: don't just show me your total profit — show me which parts of the business made money and which didn't. It helps investors, lenders, and exam boards understand how diversified enterprises (think a company selling both software and steel) actually perform.
Who must follow AS 17? Enterprises whose equity or debt securities are listed or in the process of listing on any stock exchange in India, AND enterprises with a turnover exceeding ₹50 crores (including excise duty). Smaller private unlisted companies below ₹50 crores are exempt — but ICAI loves asking this threshold.
Two types of segments: A business segment is a distinguishable part of an enterprise engaged in providing individual products/services (e.g., Rajesh & Co. has a textile division and a chemicals division — two business segments). A geographical segment is based on the economic environment — either where assets are located (production-based) or where customers are located (sales-based). The enterprise picks whichever reflects its dominant source of risks and rewards as the primary reporting format; the other becomes the secondary format. Primary gets fuller disclosures; secondary gets lighter disclosures.
The critical 10% Rule — this is asked every exam: A segment is reportable (i.e., must be separately disclosed) if it meets ANY ONE of three tests based on all segments combined (including unallocated):
- Its revenue (external + inter-segment) ≥ 10% of total revenue of all segments
- Its result (profit or loss) ≥ 10% of the greater of (total profit of all profitable segments) or (total loss of all loss-making segments) — take absolute values
- Its assets ≥ 10% of total assets of all segments
The 75% Rule: After identifying reportable segments, check — do their external revenues add up to at least 75% of total enterprise revenue? If not, identify additional segments (even if they fail the 10% test) until the 75% threshold is met. This ensures material coverage.
Inter-segment transfers must be measured on the basis the enterprise actually uses (cost, market price, etc.) and the basis must be disclosed. Unallocated items (corporate HQ costs, general borrowings) are shown separately, not pushed into any segment.