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AS 17 — Segment Reporting: PTU Limited
Under AS 17 (Segment Reporting), a segment is reportable if it satisfies ANY ONE of three quantitative thresholds: Revenue Test, Profitability Test, or Assets Test. The threshold in each case is 10% of the relevant combined total.
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Question 1 — Revenue Test Answer: (B) P, Q & T
Revenue of a segment includes both external and internal (inter-segment) sales. Total combined revenue = ₹300 lakhs (External ₹250 + Internal ₹50). Threshold = 10% × 300 = ₹30 lakhs.
Segment-wise revenues: P = 76, Q = 99, R = 16, S = 15, T = 80, U = 14. Segments with revenue ≥ ₹30 lakhs: P (76), Q (99), T (80). → Option (B)
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Question 2 — Profitability Test Answer: (C) P & T
The threshold is 10% of the greater of: (i) total profit of all profit-making segments, or (ii) total loss of all loss-making segments (in absolute terms).
Profit segments: P=22, Q=4, S=3, T=20, U=1 → Total profit = ₹50 lakhs. Loss segments: R=(4) → Total loss = ₹4 lakhs. Greater of 50 and 4 = ₹50 lakhs. Threshold = 10% × 50 = ₹5 lakhs.
Segments with |result| ≥ ₹5 lakhs: P = |22| = 22 ✓; Q = |4| = 4 ✗; R = |4| = 4 ✗; S = |3| = 3 ✗; T = |20| = 20 ✓; U = |1| = 1 ✗. → P and T qualify. Option (C)
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Question 3 — Assets Test Answer: (D) P & Q
Total assets = ₹350 lakhs. Threshold = 10% × 350 = ₹35 lakhs.
Segment assets: P = 112 ✓; Q = 147 ✓; R = 28 ✗; S = 28 ✗; T = 21 ✗; U = 14 ✗. → P and Q qualify. Option (D)
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Question 4 — Overall Test (Combined) Answer: (B) P, Q & T
A segment is reportable if it qualifies under any one of the three tests. Combining:
- P: Revenue ✓, Profitability ✓, Assets ✓ → Reportable
- Q: Revenue ✓, Assets ✓ → Reportable
- R: None → Not reportable
- S: None → Not reportable
- T: Revenue ✓, Profitability ✓ → Reportable
- U: None → Not reportable
Reportable segments = P, Q, T. Also verify the 75% external revenue test: P+Q+T external = 66+94+70 = ₹230 out of ₹250 = 92% > 75% ✓. No additional segments need to be included. → Option (B)
✍️ How to write this answer (skeleton, phrasings, trap)
- Write the 10% threshold rule once at the top before Q1 — examiners want to see you know the standard upfront; one line like '10% of combined total revenue/profit/assets' anchors your entire answer and shows conceptual clarity.
- Revenue Test: always add internal + external first, then apply 10% — the most common calculation slip is using ₹250 (external only); writing 'Total Revenue = 250 + 50 = ₹300L, Threshold = ₹30L' in your working shows the examiner exactly where your number came from.
- Profitability Test: explicitly state the 'greater of' step — don't just compute 10% of ₹46 (net); write 'Total profits = ₹50L, Total losses = ₹4L, Greater = ₹50L, Threshold = ₹5L' as a separate line; this is where 2 marks are decided.
- Assets Test is the easiest — do it in 3 lines max — state total = ₹350L, threshold = ₹35L, then list only qualifying segments; don't waste time listing non-qualifiers individually.
- Overall Test: present a small tick/cross table for all 6 segments — 'P: R✓ Pr✓ A✓ → Reportable' format signals you know the 'any ONE test' rule and lets the examiner tick your answer in under 5 seconds.
- Close with the 75% external revenue check — most students skip this; one line 'P+Q+T external = ₹230/₹250 = 92% > 75% ✓, no further segments needed' picks up easy presentation marks and shows complete knowledge of AS 17.
📋 ICAI Official Suggested Answer (Sep 2025) ICAI
Answer Key:
1. (B) P, Q & T
2. (C) P & T
3. (D) P & Q
4. (B) P, Q & T