ASLB 18 Segment Reporting
Accounting Standards for Local Bodies (ASLB) 18
Segment Reporting
Contents
Paragraphs
OBJECTIVE
SCOPE 1-7
DEFINITIONS 8 - 11
REPORTING BY SEGMENTS 12 - 26
Reporting Structures 14 - 16
Service Segments and Geographical Segments 17 - 22
Multiple Segmentation 23
Reporting Structures Not Appropriate 24 - 26
DEFINITIONS OF SEGMENT REVENUE, EXPENSE, ASSETS,
LIABILITIES AND ACCOUNTING POLICIES 27 - 42
Attributing Items to Segments 28 - 32
Segment Assets, Liabilities, Revenue and Expense 33 - 42
SEGMENT ACCOUNTING POLICIES 43 - 46
JOINT ASSETS 47 - 48
NEWLY IDENTIFIED SEGMENTS 49 - 50
DISCLOSURE 51 - 75
Additional Segment Information 65 - 66
Other Disclosure Matters 67 - 73
Segment Operating Objectives 74 - 75
APPENDIX A—ILLUSTRATIVE SEGMENT DISCLOSURES
APPENDIX B—IMPLEMENTATION GUIDANCE
APPENDIX 1 COMPARISON WITH IPSAS 18, ‘SEGMENT REPORTING’
APPENDIX 2 COMPARISON WITH EXISTING AS 17, ‘SEGMENT REPORTING’
Compendium of Accounting Standards for Local Bodies (ASLBs)
Accounting Standard for Local Bodies (ASLB) 18
Segment Reporting
This Accounting Standard includes paragraphs set in bold italic type and
plain type, which have equal authority. Paragraphs in bold italic type indicate
the main principles. This Accounting Standard should be read in the context
of its objective and the “Preface to Accounting Standards for Local Bodies” 1.
The Accounting Standards for Local Bodies (ASLB) 18 „Segment Reporting‟,
issued by the Council of the Institute of the Chartered Accountants of India,
will be recommendatory in nature in the initial years for use by the Local
Bodies. This Standard will be mandatory for Local Bodies in a State from the
date specified in this regard by the State Government concerned 2.
The following is the text of the Accounting Standards for Local Bodies
(ASLB) 18, ‟Segment Reporting‟.
Objective
The objective of this Standard is to establish principles for reporting financial
information by segments. The disclosure of this information will:
(a) Help users of the financial statements to better understand the entity‟s
past performance, and to identify the resources allocated to support
the major activities of the entity; and
(b) Enhance the transparency of financial reporting and enable the entity
to better discharge its accountability obligations.
Scope
1. An entity that prepares and presents financial statements under
the accrual basis of accounting should apply this Standard in the
presentation of segment information.
2. This Standard applies to the entities described as Local Bodies in
the Preface to Accounting Standards for Local Bodies 3.
1 Attention is specifically drawn to paragraph 4.2 of the „Preface to Accounting
Standards for Local Bodies‟, according to which Accounting Standards are intended
to apply only to items which are material.
2 In respect of compliance with the Accounting Standards for Local Bodies,
reference may be made to the paragraph 7.1 of the „Preface to the Accounting
Standards for Local Bodies‟.
3 Refer paragraph 1.3 of the „Preface to Accounting Standards for Local Bodies‟.
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Segment Reporting
3. [Refer to Appendix 1]
4. This Standard should be applied in complete sets of published
financial statements that comply with Accounting Standards for
Local Bodies (ASLBs).
5. A complete set of financial statements includes a balance sheet
(including statement of changes in net assets/equity4 annexed
thereto), income and expenditure statement, cash flow statement and
notes, as provided in ASLB 1, „Presentation of Financial Statements‟.
6. If both consolidated financial statements of a Local Body or other
economic entity and the separate financial statements of the
parent entity are presented together, segment information need
be presented only on the basis of the consolidated financial
statements.
7. If the consolidated financial statements of the Local Body or other
economic entity and the separate financial statements of the
controlling entity are compiled and presented together in a single
report, the report that contains the Local Body‟s or other controlling
entity‟s consolidated financial statements needs to present segment
information only for the consolidated financial statements.
Definitions
8. [Deleted]
9. The following term is used in this Standard with the meaning
specified:
A segment is a distinguishable activity or group of activities of an
entity for which it is appropriate to separately report financial
information for the purpose of (a) evaluating the entity’s past
performance in achieving its objectives, and (b) making decisions
about the future allocation of resources.
Terms defined in other Accounting Standards for Local Bodies
are used in this Standard with the same meaning as in those
Standards.
4 As per the decision taken by the Council of the ICAI at its meeting held during
December.2019, the statement of changes in net assets/equity is not required to be
prepared.
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10. Local Bodies and their agencies control significant public resources
and operate to provide a wide variety of goods and services in differing
geographical regions and in regions with differing socio-economic
characteristics within its jurisdiction/territory. These entities are
expected, and in some cases formally required, to use those resources
efficiently and effectively to achieve the entity‟s objectives. Entity-wide
and consolidated financial statements provide an overview of (a) the
assets controlled and liabilities incurred by the reporting entity, (b) the
cost of services provided, and (c) the taxation revenue, budget
allocations and cost recoveries generated to fund the provision of
those services. However, this aggregate information does not provide
information about the specific operational objectives and major
activities of the reporting entity and the resources devoted to, and
costs of, those objectives and activities.
11. In some cases, the activities of the entity within its territory/ jurisdiction
may be broad, and encompass so wide a range of different
geographical regions, or regions with different socio-economic
characteristics, that it is necessary to report disaggregated financial
and non-financial information about particular segments of the entity to
provide relevant information for accountability and decision making
purposes.
Reporting by Segments
12. An entity should identify its separate segments in accordance
with the requirements of paragraph 9 of this Standard and should
present information about those segments as required by
paragraph 51-75 of this Standard.
13. Under this Standard, Local Bodies will identify as separate segments
each distinguishable activity or group of activities for which financial
information should be reported for purposes of evaluating the past
performance of the entity in achieving its objectives, and for making
decisions about the allocation of resources by the entity. In addition to
disclosure of the information required by paragraphs 51 to 75 of this
Standard, entities are also encouraged to disclose additional
information about reported segments as identified by this Standard or
as considered necessary for accountability and decision making
purposes.
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Segment Reporting
Reporting Structures
14. In most cases, the major classifications of activities identified in budget
documentation will reflect the segments for which information is
reported to the governing body and the authorised senior official of the
entity. In most cases, the segments reported to the governing body
and the authorised senior official will also reflect the segments
reported in the financial statements. This is because the governing
body and the authorised senior official will require information about
segments to enable them to discharge their managerial responsibilities
and to evaluate the performance of the entity in achieving its
objectives in the past and to make decisions about the allocation of
resources by the entity in the future.
15. Determining the activities which should be grouped as separate
segments and reported in the financial statements for accountability
and decision-making purposes involves judgment. In making that
judgment, preparers of the financial statements will consider such
matters as:
(a) The objective of reporting financial information by segment as
identified in paragraph 9 above;
(b) The expectations of members of the community and their
elected or appointed representatives regarding the key activities
of the entity;
(c) The qualitative characteristics of financial reporting as identified
in the „Conceptual Framework for General Purpose Financial
Reporting in Local Bodies‟. They include the relevance, faithful
representation, understandability, timeliness, comparability and
verifiability over time of financial information that is reported
about an entity‟s different segments; and
(d) Whether a particular segment structure reflects the basis on
which the governing body and the authorised senior official
require financial information to enable them to assess the past
performance of the entity in achieving its objectives and to make
decisions about the allocation of resources to achieve entity
objectives in the future.
16. At the Local Body level, financial information is often aggregated and
reported in a manner which reflects, for example, major economic
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classifications of activities undertaken by local body, such as health,
education, welfare, transportation, and water supply, etc.
Service Segments and Geographical Segments
17. The types of segments reported to the governing body and the
authorised senior official of an entity are frequently referred to as
“service segments” or “geographical segments”. These terms are used
in this Standard with the following meanings:
(a) A “service segment” refers to a distinguishable component
of an entity that is engaged in providing related outputs or
achieving particular operating objectives consistent with the
overall mission of each entity; and
(b) A “geographical segment” is a distinguishable component of
an entity that is engaged in providing outputs or achieving
particular operating objectives within a particular
geographical area.
18. The departments and agencies of Local Bodies are usually managed
along service lines because this reflects the way in which major
outputs are identified, their achievements monitored and their resource
needs identified and budgeted. An example is an entity, which reports
internally on the basis of service lines or service segments, whose
organisational structure and internal reporting system reflects various
services such as health, education, water supply, transportation, etc .,
as separate segments. This basis of segmentation may be adopted
internally because the skills and facilities necessary to deliver the
desired outputs and outcomes for each of these services are
perceived to be different. In addition, key financial decisions faced by
management include determination of the resources to allocate to
each of those outputs or activities. In these cases, it is likely that
reporting externally on the basis of service segments will also satisfy
the requirements of this Standard.
19. Factors that will be considered in determining whether outputs (goods
and services) are related and should be grouped as segments for
financial reporting purposes include:
(a) The primary operating objectives of the entity and the goods,
services and activities that relate to the achievement of each of
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those objectives and whether resources are allocated and
budgeted on the basis of groups of goods and services;
(b) The nature of the goods or services provided or activities
undertaken;
(c) The nature of the production process and/or service delivery
and distribution process or mechanism;
(d) The type of consumer for the goods or services;
(e) Whether this reflects the way in which the entity is managed and
financial information is reported to senior management and the
governing body, i.e., administrative reporting; and
(f) If applicable, the nature of the regulatory environment, (for
example, Urban Local Bodies or Rural Local Bodies).
20. An entity may be organised and reported internally to the governing
body and the authorised senior official on a regional basis — within its
jurisdictional boundaries. Where this occurs the internal reporting
system reflects a geographical segment structure.
21. A geographical segment structure may be adopted where, for
example, the organisational structure and internal reporting system of
an entity is structured on the basis of regional outcomes within its
jurisdictional boundaries because the key performance assessments
and resource allocation decisions to be made by the governing body
and the authorised senior official are determined by reference to
regional achievements and regional needs. This structure may have
been adopted to preserve regional autonomy of needs and delivery of
various services, or because operating conditions or service delivery
objectives are substantially different from one region to another. It may
also have been adopted simply because management believes that an
organisational structure based on regional devolution of responsibility
better serves the objectives of the entity. In these cases, resource
allocation decisions are initially made, and subsequently monitored, by
the governing body and the authorised senior official on a regional
basis. In these cases, it is likely that reporting information by
geographical segments in the financial statements will also satisfy the
requirements of this Standard.
22. Factors that will be considered in determining whether financial
information should be reported on a geographical basis include:
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(a) Similarity of economic, social and political conditions in different
regions;
(b) Relationships between the primary objectives of the entity and
the different regions;
(c) Whether service delivery characteristics and operating
conditions differ in different regions;
(d) Whether this reflects the way in which the entity is managed and
financial information is reported to the authorised senior officials
and the governing body; and
(e) Special needs, skills or risks associated with operations in a
particular area.
22A. In case the number of segments that are reportable in accordance with
the requirements of this Standard increases above ten, it is considered
that the practical limit has been reached and beyond this segment
information may become too detailed. Therefore, the number of
segments to be reported in accordance with this Standard should not
increase above ten.
Multiple Segmentation
23. In some cases, an entity may report to the governing body and the
authorised senior official segment revenue, expense, assets and
liabilities on the basis of more than one segment structure, for
example, by both service and geographical segments. Reporting on
the basis of both service segments and geographical segments in the
external financial statements often will provide useful information if the
achievement of an entity‟s objectives is strongly affected both by the
different products and services it provides and the different
geographical areas to which those goods and services are provided. In
such cases, the segments may be reported separately or as a matrix.
In addition, a primary and secondary segment reporting structure may
be adopted with only limited disclosures made about secondary
segments.
23A. The entity‟s internal reporting system to the governing body and the
authorised senior official should govern whether its primary segment
reporting format will be service segments or geographical segments.
For example, if the organisational structure and internal reporting
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system of an entity is structured on the basis of regional outcomes
within its jurisdictional boundaries then its internal reporting system
reflects the geographical segment structure. In such case,
geographical segment structure will become its primary segment
reporting format and service segment structure will become its
secondary segment reporting format.
Reporting Structures Not Appropriate
24. As noted above, in most cases the segments for which information is
reported internally to the governing body and the authorised senior
official of the entity for the purpose of evaluating the entity‟s past
performance and for making decisions about the future allocation of
resources, will reflect those identified in budget documentation and will
also be adopted for external reporting purposes in accordance with the
requirements of this Standard. However, in some cases an entity‟s
internal reporting to the governing body and the authorised senior
official may be structured to aggregate and report on a basis which
distinguishes revenue, expenses, assets and liabilities related to
budget-dependent activities from those of activities that are not
dependent on budget. Reporting segment information in the financial
statements on the basis of only these segments is unlikely to meet the
objectives specified for this Standard. This is because these segments
are unlikely to provide information that is relevant to users about, for
example, the performance of the entity in achieving its major operating
objectives.
25. In some cases, the disaggregated financial information reported to the
governing body and the authorised senior official may not report
expenses, revenues, assets and liabilities by service segment,
geographical segment or by reference to other activities. Such reports
may be constructed to reflect only expenditures by nature (for
example, wages, rent, supplies and capital acquisitions) on a line item
basis that is consistent with the budget appropriation or other funding
or expenditure authorisation model applicable to the entity. This may
occur where the purpose of financial reporting to the governing body
and senior management is to evidence compliance with spending
mandates rather than for purposes of evaluating the past performance
of the entity‟s major activities in achieving their objectives and for
making decisions about the future allocation of resources. When
internal reporting to the governing body and the authorised senior
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official is structured to report only compliance information, reporting
externally on the same basis as the internal reporting to the governing
body and the authorised senior official will not meet the requirement of
this Standard.
26. When an entity‟s internal reporting structure does not reflect the
requirements of this Standard, for external reporting purposes the
entity will need to identify segments which satisfy the definition of a
segment in paragraph 9 and disclose the information required by
paragraphs 51-75.
Definitions of Segment Revenue, Expense,
Assets, Liabilities and Accounting Policies
27. The following additional terms are used in this Standard with the
meanings specified:
Segment revenue is revenue reported in the entity’s statement of
income and expenditure that is directly attributable to a segment
and the relevant portion of entity revenue that can be allocated on
a reasonable basis to a segment, whether from budget
appropriations or similar, grants, transfers, fines, fees or sales or
rendering services to external consumers or from transactions
with other segments of the same entity. Segment revenue does
not include:
(a) Interest or dividend revenue, including interest earned on
advances or loans to other segments, unless the segment’s
operations are primarily of a financial nature; or
(b) Gains on sales of investments or gains on extinguishment
of debt unless the segment’s operations are primarily of a
financial nature.
Segment revenue includes an entity’s share of net surplus
(deficit) of associates, joint ventures, or other investments
accounted for under the equity method only if those items are
included in consolidated or total entity revenue.
Segment revenue includes a joint venturer’s share of the revenue
of a jointly controlled entity that is accounted for by proportionate
consolidation in accordance with ASLB 8, ‘Interests in Joint
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Segment Reporting
Venture5’.
Segment expense is an expense resulting from the operating
activities of a segment that is directly attributable to the segment
and the relevant portion of an expense that can be allocated on a
reasonable basis to the segment, including expenses relating to
the provision of goods and services to external parties and
expenses relating to transactions with other segments of the
same entity. Segment expense does not include:
(a) Interest, including interest incurred on advances or loans
from other segments, unless the segment’s operations are
primarily of a financial nature;
(b) Losses on sales of investments or losses on
extinguishment of debt unless the segment’s operations are
primarily of a financial nature;
(c) An entity’s share of net deficit or losses of associates, joint
ventures, or other investments accounted for under the
equity method;
(d) Income tax expense, if applicable; or
(e) General administrative expenses, head office expenses, and
other expenses that arise at the entity level and relate to the
entity as a whole. However, costs are sometimes incurred at
the entity level on behalf of a segment. Such costs are
segment expenses if they relate to the segment’s operating
activities and they can be directly attributed or allocated to
the segment on a reasonable basis.
Segment expense includes a joint venturer’s share of the
expenses of a jointly controlled entity that is accounted for by
proportionate consolidation in accordance with ASLB 8, ‘Interests
in Joint Ventures’.
For a segment’s operations that are primarily of a financial
nature, interest revenue and interest expense may be reported as
5 IPSAS 8, „Interests in Joint Ventures‟, has been superseded by a new IPSAS,
accordingly, ASLB 8 would not be formulated and appropriate revisions in this ASLB
would be carried out in the revision stage.
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a single net amount for segment reporting purposes only if those
items are netted in the consolidated or entity financial
statements.
Segment assets are those operating assets that are employed by
a segment in its operating activities and that either are directly
attributable to the segment or can be allocated to the segment on
a reasonable basis.
If a segment’s segment revenue includes interest or dividend
revenue, its segment assets include the related receivables,
loans, investments, or other revenue-producing assets.
Segment assets include investments accounted for under the
equity method only if the net surplus (deficit) from such
investments is included in segment revenue. Segment assets
include a joint venturer’s share of the operating assets of a jointly
controlled entity that is accounted for by proportionate
consolidation in accordance with ASLB 8, ‘Interests in Joint
Ventures’.
Segment assets are determined after deducting related
allowances that are reported as direct offsets in the entity’s
balance sheet.
Segment liabilities are those operating liabilities that result from
the operating activities of a segment and that either are directly
attributable to the segment or can be allocated to the segment on
a reasonable basis.
If a segment’s segment expense includes interest expense, its
segment liabilities include the related interest-bearing liabilities.
Segment liabilities include a joint venturer’s share of the
liabilities of a jointly controlled entity that is accounted for by
proportionate consolidation in accordance with ASLB 8, ‘Interests
in Joint Venture’.
Segment accounting policies are the accounting policies adopted
for preparing and presenting the financial statements of the
consolidated group or entity as well as those accounting policies
that relate specifically to segment reporting.
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Segment Reporting
Attributing Items to Segments
28. The definitions of segment revenue, segment expense, segment
assets, and segment liabilities include amounts of such items that are
directly attributable to a segment and amounts of such items that can
be allocated to a segment on a reasonable basis.
29. An entity looks to its internal financial reporting system as the starting
point for identifying those items that can be directly attributed, or
reasonably allocated, to segments. That is, where segments used for
internal reporting purposes are adopted, or form the basis of segments
adopted, for general purpose financial statements, there is a
presumption that amounts that have been identified with segments for
internal financial reporting purposes are directly attributable or
reasonably allocable to segments for the purpose of measuring the
segment revenue, segment expense, segment assets and segment
liabilities.
30. In some cases, a revenue, expense, asset or liability may have been
allocated to segments for internal financial reporting purposes on a
basis that is understood by entity management but that could be
deemed subjective, arbitrary or difficult to understand by external
users of financial statements. Such an allocation would not constitute
a reasonable basis under the definitions of segment revenue, segment
expense, segment assets and segment liabilities in this Standard.
Conversely, an entity may choose not to allocate some item of
revenue, expense, asset or liability for internal financial reporting
purposes, even though a reasonable basis for doing so exists. Such
an item is allocated pursuant to the definitions of segment revenue,
segment expense, segment assets and segment liabilities in this
Standard.
31. Local Bodies can generally identify the costs of providing certain
groups of goods and services or of undertaking certain activities and
the assets that are necessary to facilitate those activities. This
information is needed for planning and control purposes. However, in
many cases the operations of Local bodies and its departments are
funded by “block” appropriations, or appropriations on a “line item”
basis reflecting the nature of the major classes of expenses or
expenditures. These “block” or “line item” appropriations may not be
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related to specific service lines, functional activities or geographical
regions. In some cases, it may not be possible to directly attribute
revenue to a segment or to allocate it to a segment on a reasonable
basis. Similarly, some assets, expenses and liabilities may not be able
to be directly attributed, or allocated on a reasonable basis, to
individual segments because they support a wide range of service
delivery activities across a number of segments or are directly related
to general administration activities which are not identified as a
separate segment. The unattributed or unallocated revenue, expense,
assets and liabilities would be reported as an unallocated amount in
reconciling the segment disclosures to the aggregate entity revenue as
required by paragraph 64 of this ASLB.
32. Local Bodies and their departments may enter into arrangements with
private sector entities for the delivery of goods and services or to
conduct other activities. These arrangements may take the form of a
joint venture or an investment in an associate which is accounted for
by the equity method of accounting. Where this is the case, segment
revenue will include the segment‟s share of the equity accounted net
surplus (deficit), where the equity accounted surplus (deficit) is
included in entity revenue and it can be directly attributed or reliably
allocated to the segment on a reasonable basis. In similar
circumstances, segment revenue and segment expense will include
the segment‟s share of revenue and expense of a jointly controlled
entity which is accounted for by proportionate consolidation.
Segment Assets, Liabilities, Revenue and Expense
33. Examples of segment assets include current assets that are used in
the operating activities of the segment; property, plant and equipment;
assets that are the subject of finance leases; and intangible assets. If
a particular item of depreciation or amortisation is included in segment
expense, the related asset is also included in segment assets.
Segment assets do not include assets used for general entity or head
office purposes, for example:
(a) The office of the central administration of an entity is not
included in segments reflecting the delivery of various services
such as education, housing, transportation, water supply, etc.,
or
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Segment Reporting
(b) The general assembly building is not included in segments
reflecting major functional activities such as education and
health when reporting at the level of the economic entity.
Segment assets include operating assets shared by two or more
segments if a reasonable basis for allocation exists.
34. The consolidated financial statements of a Local Body may
encompass entities acquired in an entity acquisition which gives rise to
purchased goodwill 6. In these cases, segment assets will include
goodwill that is directly attributable to a segment or that can be
allocated to a segment on a reasonable basis, and segment expense
includes related amortisation of goodwill.
35. Examples of segment liabilities include payables, accrued liabilities,
advances from members of the community for the provision of partially
subsidised goods and services in the future and claims relating to the
provision of goods and services. Segment liabilities do not include
borrowings, liabilities related to assets that are the subject of finance
leases, and other liabilities that are incurred for financing rather than
operating purposes. If interest expense is included in segment
expense, the related interest-bearing liability is included in segment
liabilities.
36. The liabilities of segments whose operations are not primarily of a
financial nature do not include borrowings and similar liabilities
because segment revenues and expenses do not include financing
revenues and expenses. Further, because debt is often issued at the
head office level or by a central borrowing authority on an entity-wide
basis, it is often not possible to directly attribute, or reasonably
allocate, the interest-bearing liability to the segment. However, if the
financing activities of the entity are identified as a separate segment,
as may occur at the economic entity level, expenses of the “finance”
segment will include interest expense, and the related interest-bearing
liabilities will be included in segment liabilities.
37. Accounting Standards may require adjustments to be made to the
carrying amounts of the identifiable assets and liabilities of an entity
acquired in an acquisition (see for example AS 14). Measurements of
6 Purchase consideration may be there in case of acquisition of a private entity by a
Local Body and in that case goodwill may arise.
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segment assets and liabilities include any adjustments to the prior
carrying amounts of the identifiable segment assets and segment
liabilities of an entity acquired in an entity combination accounted for
as a purchase, even if those adjustments are made only for the
purpose of preparing consolidated financial statements and are not
recorded in either the controlling entity‟s separate or the controlled
entity‟s individual financial statements. Similarly, if property, plant, and
equipment has been revalued subsequent to acquisition, in
accordance with the revaluation model in ASLB 17, „Property, Plant
and Equipment‟, measurements of segment assets reflect those
revaluations.
38. In some cases, a Local Body may control an entity that operates on a
commercial basis, and is subject to income tax. These entities may be
required to apply accounting standards such as Accounting Standard
(AS) 22, „Income Taxes‟ which prescribe the accounting treatment of
income taxes. Such standards may require the recognition of income
tax assets and liabilities in respect of income tax expenses, which are
recognised in the current period and are recoverable or repayable in
future periods. These assets and liabilities are not included in segment
assets or segment liabilities because they arise as a result of all the
activities of the entity as a whole and the tax arrangements in place in
respect of the entity.
39. Some guidance for cost allocation can be found in other ASLBs. For
example, ASLB 12, „Inventories‟ provides guidance for attributing and
allocating costs to inventories, and ASLB 11, „Construction Contracts‟
provides guidance for attributing and allocating costs to contracts.
That guidance may be useful in attributing and allocating costs to
segments.
40. ASLB 2, „Cash Flow Statements‟ provides guidance on whether bank
overdrafts should be included as a component of cash or should be
reported as borrowings.
41. The financial statements of a Local Body, and certain other controlling
entities, may require the consolidation of a number of separate entities
such as departments, and its agencies. In preparing these
consolidated financial statements, transactions and balances between
controlled entities will be eliminated in accordance with ASLB on
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„Consolidated and Separate Financial Statements‟7. However,
segment revenue, segment expense, segment assets and segment
liabilities are determined before balances and transactions between
entities within the economic entity are eliminated as part of the
consolidation process, except to the extent that such intra-economic
entity balances and transactions are between entities within a single
segment.
42. While the accounting policies used in preparing and presenting the
financial statements of the entity as a whole are also the fundamental
segment accounting policies, segment accounting policies include, in
addition, policies that relate specifically to segment reporting, such as
the method of pricing inter-segment transfers, and the basis for
allocating revenues and expenses to segments.
Segment Accounting Policies
43. Segment information should be prepared in conformity with the
accounting policies adopted for preparing and presenting the
financial statements of the consolidated group or entity.
44. There is a presumption that the accounting policies that the governing
body and management of an entity have chosen to use in preparing
the consolidated or entity-wide financial statements are those that the
governing body and management believe are the most appropriate for
external reporting purposes. Since the purpose of segment information
is to help users of financial statements better understand and make
more informed judgments about the entity as a whole, this Standard
requires the use, in preparing segment information, of the accounting
policies that the governing body and management have chosen for
preparation of the consolidated or entity-wide financial statements.
That does not mean, however, that the consolidated or entity
accounting policies are to be applied to segments as if the segments
were separate reporting entities. A detailed calculation done in
applying a particular accounting policy at the entity-wide level may be
allocated to segments if there is a reasonable basis for doing so.
7 ASLB on „Consolidated Financial Statements‟ is yet to be formulated. The Guidance
in regard to this may be obtained from other corresponding pronouncements as
per the hierarchy prescribed in paragraph 15 of the ASLB 3, „Accounting
Policies, Changes in Accounting Estimates, and Errors‟.
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Employee entitlement calculations, for example, are often done for an
entity as a whole, but the entity-wide figures may be allocated to
segments based on salary and demographic data for the segments.
45. As noted in paragraph 42, accounting policies that deal with entity only
issues such as inter-segment pricing may need to be developed.
ASLB 1, „Presentation of Financial Statements‟ requires disclosure of
accounting policies necessary to understand the financial statements.
Consistent with those requirements, segment specific policies may
need to be disclosed.
46. This Standard permits the disclosure of additional segment information
that is prepared on a basis other than the accounting policies adopted
for the consolidated or entity financial statements provided that:
(a) The information is relevant for performance assessment and
decision making purposes; and
(b) The basis of measurement for this additional information is
clearly described.
Joint Assets
47. Assets that are jointly used by two or more segments should be
allocated to segments if, and only if, their related revenues and
expenses are also allocated to those segments.
48. The way in which asset, liability, revenue and expense items are
allocated to segments depends on such factors as the nature of those
items, the activities conducted by the segment, and the relative
autonomy of that segment. It is not possible or appropriate to specify a
single basis of allocation that should be adopted by all entities. Nor is
it appropriate to force allocation of entity asset, liability, revenue and
expense items that relate jointly to two or more segments, if the only
basis for making those allocations is arbitrary or difficult to understand.
At the same time, the definitions of segment revenue, segment
expense, segment assets and segment liabilities are interrelated, and
the resulting allocations should be consistent. Therefore, jointly used
assets are allocated to segments if, and only if, their related revenues
and expenses are also allocated to those segments. For example, an
asset is included in segment assets if, and only if, the related
depreciation or amortisation is included in measuring segment
expense.
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Segment Reporting
Newly Identified Segments
49. If a segment is identified as a segment for the first time in the
current period, prior period segment data that is presented for
comparative purposes should be restated to reflect the newly
reported segment as a separate segment, unless it is
impracticable to do so.
50. New segments may be reported in financial statements in differing
circumstances. For example, an entity may change its internal
reporting structure from a service segment structure to a geographical
segment structure and management may consider it appropriate that
this segment structure also be adopted for external reporting
purposes. An entity may also undertake significant new or additional
activities, or increase the extent to which an activity previously
operating as an internal support service provides services to external
parties. In these cases, new segments may be reported for the first
time in the general purpose financial statements. Where this occurs,
this Standard requires that prior period comparative data should be
restated to reflect the current segment structure where practicable.
Disclosure
51. The disclosure requirements in paragraphs 52–75 should be
applied to each segment.
52. An entity should disclose segment revenue and segment expense
for each segment. Segment revenue from budget appropriation or
similar allocation, segment revenue from other external sources
and segment revenue from transactions with other segments
should be separately reported.
53. An entity should disclose the total carrying amount of segment
assets for each segment.
54. An entity should disclose the total carrying amount of segment
liabilities for each segment.
55. An entity should disclose the total cost incurred during the period
to acquire segment assets that are expected to be used during
more than one period for each segment.
56. An entity is encouraged, but not required, to disclose the nature and
amount of any items of segment revenue and segment expense that
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Compendium of Accounting Standards for Local Bodies (ASLBs)
are of such size, nature, or incidence that their disclosure is relevant to
explain the performance of each segment for the period.
57. ASLB 1, „Presentation of Financial Statements‟ requires that when
items of revenue or expense are material, their nature and amount of
such items are disclosed separately. ASLB 1 identifies a number of
examples of such items, including write-downs of inventories and
property, plant, and equipment; provisions for restructurings; disposals
of property, plant, and equipment; litigation settlements; and reversals
of provisions. The encouragement in paragraph 56 is not intended to
change the classification of any such items or to change the
measurement of such items. The disclosure encouraged by that
paragraph, however, does change the level at which the significance
of such items is evaluated for disclosure purposes from the entity level
to the segment level.
58. This Standard does not require a segment result to be disclosed.
However, if a segment result is calculated and disclosed, it is an
operating result which does not include finance charges.
59. An entity is encouraged but not required to disclose segment cash
flows consistent with the requirements of ASLB 2, „Cash Flow
Statements‟. ASLB 2 requires that an entity present a cash flow
statement that separately reports cash flows from operating, investing,
and financing activities. It also requires the disclosure of information
about certain cash flows. The disclosure of cash flow information
about each segment can be useful in understanding the entity‟s overall
financial position, liquidity and cash flows.
60. An entity which does not disclose segment cash flows in accordance
with ASLB 2, „Cash Flow Statements‟ is encouraged, but not required,
to disclose for each reportable segment:
(a) Segment expense for depreciation and amortisation of segment
assets;
(b) Other significant non-cash expenses; and
(c) Significant non-cash revenues that are included in segment
revenue.
This will enable users to determine the major sources and uses of
cash in respect of segment activities for the period.
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61. An entity should disclose for each segment the aggregate of the
entity’s share of the net surplus (deficit) of associates, joint
ventures, or other investments accounted for under the equity
method if substantially all of those associates’ operations are
within that single segment.
62. While a single aggregate amount is disclosed pursuant to the
requirements of paragraph 61, each associate, joint venture or other
equity method investment is assessed individually to determine
whether its operations are substantially all within a segment.
63. If an entity’s aggregate share of the net surplus (deficit) of
associates, joint venture, or other investments accounted for
under the equity method is disclosed by segment, the aggregate
investments in those associates and joint ventures should also
be disclosed by segment.
64. An entity should present reconciliation between the information
disclosed for segments and the aggregated information in the
consolidated or entity financial statements. In presenting the
reconciliation, segment revenue should be reconciled to entity
revenue from external sources (including disclosure of the
amount of entity revenue from external sources not included in
any segment’s revenue); segment expense should be reconciled
to a comparable measure of entity expense; segment assets
should be reconciled to entity assets; and segment liabilities
should be reconciled to entity liabilities.
Additional Segment Information
65. As noted previously, it is anticipated that segments will usually be
based on the major goods and services the entity provides, the
programs it operates or the activities it undertakes. This is because
information about these segments provides users with relevant
information about the performance of the entity in achieving its
objectives and enables the entity to discharge its accountability
obligations. However, in some organisations, a geographical or other
basis may better reflect the basis on which services are provided and
resources allocated within the entity and, therefore, will be adopted for
the financial statements.
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Compendium of Accounting Standards for Local Bodies (ASLBs)
66. This Standard adopts the view that disclosure of minimum information
about both service segments and geographical segments is likely to be
useful to users for accountability and decision-making purposes.
Therefore, if an entity reports segment information on the basis of:
(a) The major goods and services the entity provides, the programs
it operates, the activities it undertakes or other service
segments, it is also encouraged to report the following for each
geographical segment that is reported internally to the
governing body and the authorised senior official of the entity:
(i) Segment expense;
(ii) Total carrying amount of segment assets; and
(iii) Total outlay during the period to acquire segment assets
that are expected to be used during more than one period
(property, plant, equipment and intangible assets); and
(b) Geographical segments or another basis not encompassed by
(a), the entity is encouraged to also report the following segment
information for each major service segment that is reported
internally to the governing body and the authorised senior
official of the entity:
(i) Segment expense;
(ii) Total carrying amount of segment assets; and
(iii) Total outlay during the period to acquire segment assets
that are expected to be used during more than one period
(property, plant, equipment and intangible assets).
Other Disclosure Matters
67. In measuring and reporting segment revenue from transactions
with other segments, inter-segment transfers should be measured
on the basis that they occur. The basis of pricing inter-segment
transfers and any change therein should be disclosed in the
financial statements.
68. Changes in accounting policies adopted for segment reporting
that have a material effect on segment information should be
disclosed. Such disclosure should include a description of the
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Segment Reporting
nature of the change, the reasons for the change, and the
financial effect of the change if it is reasonably determinable. If an
entity changes the identification of its segments, then for the
purpose of comparison, an entity should report segment data for
both the old and the new bases of segmentation in the year in
which it changes the identification of its segments.
69 Changes in accounting policies adopted by the entity are dealt with in
ASLB 3, „Accounting Policies, Changes in Accounting Estimates and
Errors‟. ASLB 3 requires that changes in accounting policy are made
by an ASLB, or if the change will result in reliable and more relevant
information about transactions, other events or conditions in the
financial statements of the entity, or if change in an accounting policy
is required by a statue.
70. Changes in accounting policies applied at the entity level that affect
segment information are dealt with in accordance with ASLB 3. Unless
a new ASLB specifies otherwise, ASLB 3 requires that:
(a) A change in accounting policy be applied retrospectively unless
it is impracticable to determine either the cumulative effect or
the period-specific effects of the change;
(b) If retrospective application is not practicable for all periods
presented, the new accounting policy should be applied
retrospectively from the earliest practicable date; and
(c) If it is impracticable to determine the cumulative effect of
applying the new accounting policy at the start of the current
period, the policy should be applied prospectively from the
earliest date practicable.
71. [Refer to Appendix 1]
72. Paragraph 67 requires that, for segment reporting purposes, inter-
segment transfers should be measured on the basis that the entity
actually used to price those transfers. If an entity changes the method
that it actually uses to price inter-segment transfers that is not a
change in accounting policy. However, paragraph 67 requires
disclosure of the change.
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Compendium of Accounting Standards for Local Bodies (ASLBs)
73. If not otherwise disclosed in the financial statements or
elsewhere in the annual report, an entity should indicate:
(a) The types of goods and services included in each reported
service segment;
(b) The composition of each reported geographical segment;
and
(c) If neither a service nor geographical basis of segmentation
is adopted, the nature of the segment and activities
encompassed by it.
Segment Operating Objectives
74. If not otherwise disclosed in the financial statements or elsewhere in
the annual report, the entity is encouraged to disclose the broad
operating objectives established for each segment at the
commencement of the reporting period and to comment on the extent
to which those objectives were achieved.
75. To enable users to assess the performance of an entity in achieving its
service delivery objectives, it is necessary to communicate those
objectives to users. The disclosure of information about the
composition of each segment, the service delivery objectives of those
segments and the extent to which those objectives were achieved will
support this assessment. This information will also enable the entity to
better discharge its accountability obligations. In many cases, this
information will be included in the annual report as part of the report of
the governing body or the authorised senior official. In such cases,
disclosure of this information in the financial statements is not
necessary.
76-77. [Refer to Appendix 1]
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Segment Reporting
Appendix A
Illustrative Segment Disclosures
The appendix is illustrative only and does not form part of the Standard. The
purpose of the appendix is to illustrate the application of the standard to
assist in clarifying its meaning.
The appendix illustrate the both service segment and geographical segment
disclosures that this Standard would require for a Local Body. For illustrative
purpose, the examples given below presents comparative data for two years.
Segment data is required for each year for which a complete set of financial
statements is presented.
SCHEDULE A – INFORMATION REPORTED AS PER SERVICE
SEGMENTS (All amounts in ₹ lakhs)
Health Education Water Housing Eliminations Consolidated
Supply &
Sewage
Services
20X2 20X1 20X2 20X1 20X2 20X1 20X2 20X1 20X2 20X1 20X2 20X1
SEGMENT
REVENUE
Appropriation 48 40 22 23 10 10 7 7
Revenue from 5 4 - - 9 6 - -
external
sources
Inter-segment 10 6 6 7 2 4 2 2
transfers
Total Segment 63 50 28 30 21 20 9 9 20 19 101 90
Revenue
SEGMENT
EXPENSE
Salaries and (39) (31) (13) (13) (13) (13) (2) (2)
Wages
Depreciation (9) (7) (5) (7) (5) (3) (1) (1)
Other expense (12) (11) (10) (9) (5) (5) (2) (2)
Total Segment (60) (49) (28) (29) (23) (21) (5) (5) 20 19 (96) (85)
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Compendium of Accounting Standards for Local Bodies (ASLBs)
Expenses
Unallocated (7) (9)
central
expenses
Deficit from (2) (4)
Operating
Activities
Interest (4) (3)
expense
Interest income 2 3
Share of net 8 7 8 7
surplus of
associates
Surplus for 4 3
the period
OTHER
INFORMATION
Segment 54 50 34 30 10 10 10 9 108 99
assets
Investment in 32 26 32 26
associates
(equity method)
Unallocated 35 30
central assets
Consolidated 175 155
Total Assets
Segment 25 15 8 11 8 8 1 1 42 35
liabilities
Unallocated 40 55
central
liabilities
Consolidated 82 90
Total
Liabilities
Capital 13 10 9 5 4 0 2 3
expenditure
Non-cash (8) (2) (3) (3) (2) (2) (1) (1)
expense
excluding
depreciation
Non-cash - - - - 1 1 - -
revenue
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Segment Reporting
SCHEDULE B – INFORMATION REPORTED AS PER GEOGRAPHIC
SEGMENTS (All amounts in ₹ lakhs)
North East Zone West Zone South Eliminations
Zone Zone Consolidated
20X2 20X1 20X2 20X1 20X2 20X1 20X2 20X1 20X2 20X1 20X2 20X1
SEGMENT
REVENUE
Appropriation 48 40 22 23 10 10 7 7
Revenues from 5 4 - - 9 6 - -
external
sources
Inter-segment 10 6 6 7 2 4 2 2
transfers
Total Segment 63 50 28 30 21 20 9 9 20 19 101 90
Revenue
SEGMENT
EXPENSE
Salaries and (39) (31) (13) (13) (13) (13) (2) (2)
Wages
Depreciation (9) (7) (5) (7) (5) (3) (1) (1)
Other expense (12) (11) (10) (9) (5) (5) (2) (2)
Total Segment (60) (49) (28) (29) (23) (21) (5) (5) 20 19 (96) (85)
Expenses
Unallocated (7) (9)
central
expenses
Deficit from (2) (4)
Operating
Activities
Interest (4) (3)
expense
Interest income 2 3
Share of net 8 7 8 7
surplus of
associates
Surplus for 4 3
the period
OTHER
INFORMATION
Segment 54 50 34 30 10 10 10 9 108 99
assets
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Compendium of Accounting Standards for Local Bodies (ASLBs)
Investment in 32 26 32 26
associates
(equity method)
Unallocated 35 30
central assets
Consolidated 175 155
Total Assets
Segment 25 15 8 11 8 8 1 1 42 35
liabilities
Unallocated 40 55
central
liabilities
Consolidated 82 90
Total
Liabilities
Capital 13 10 9 5 4 0 2 3
expenditure
Non-cash (8) (2) (3) (3) (2) (2) (1) (1)
expense
excluding
depreciation
Non-cash - - - - 1 1 - -
revenue
Note : Under Schedule A, Local Body reports to the governing body on the
basis of major services: health, education, water supply & sewage services
and housing and under Schedule B, Local Body report on the basis of major
geographical areas: north zone, east zone, west zone & south zone.
In above examples, the information reported about the segments is used by
the governing body and the authorised senior officials as a basis for
evaluating the entity‟s past performance in achieving its objectives and for
making decisions about the future allocation of resources. The disclosure of
information about these segments is also considered appropriate for external
reporting purposes.
Inter-segment transfers: In both examples segment revenue and segment
expense include revenue and expense arising from transfers between
segments. Such transfers are usually accounted for at cost and are
eliminated on consolidation. Investments in associates are accounted for
using the equity method. The investment in, and the Local Body‟s share of
associate‟s net profit are excluded from segment assets and segment
revenue.
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Segment Reporting
Appendix B
Implementation Guidance
This guidance accompanies, but is not part of, ASLB 18.
Summary of Required Disclosures
[¶xx] refers to paragraph xx in the Standard.
Disclosures
Total expense by segment [¶52]
Total revenue by segment [¶52]
Revenue from budget appropriation or similar allocation by segment [¶52]
Revenue from external sources (other than appropriation or similar
allocation) by segment [¶52]
Revenue from transactions with other segments by segment [¶52]
Carrying amount of segment assets by segment [¶53]
Segment liabilities by segment [¶54]
Cost to acquire assets by segment [¶55]
Share of net surplus (deficit) of [¶61] and investment in [¶63] equity method
associates or joint ventures by segment (if substantially all within a sing le
segment)
Reconciliation of revenue, expense, assets and liabilities by segment [¶64]
Other Disclosures
Basis of pricing inter-segment transfers and any changes therein [¶67]
Changes in segment accounting policies [¶68]
Types of products and services in each service segment [¶73]
Composition of each geographical segment [¶73]
If neither a service nor geographical basis of segmentation is adopted, the
nature of the segments and activities encompassed by each segment [¶73]
235
Compendium of Accounting Standards for Local Bodies (ASLBs)
Appendix 1
Note: This Appendix is not a part of the Accounting Standard for Local
Bodies. The purpose of this Appendix is only to bring out the major
differences, if any, between Accounting Standard for Local Bodies (ASLB)
on, „Segment Reporting‟ and the corresponding International Public Sector
Accounting Standard (IPSAS) 18, „Segment Reporting‟.
Comparison with IPSAS 18, ‘Segment Reporting’
1 In certain instances, different terminology has been used in the ASLB
18 as compared to the corresponding IPSAS 18, „Segment Reporting‟,
e.g., the term „balance sheet‟ has been used in place of „statement of
financial position‟, „income and expenditure statement‟ has been used
in place of „statement of financial performance‟ and the „authorised
senior official‟ has been used in place of „senior manager‟.
2 Appendix on qualitative characteristics of financial reporting given in
IPSAS 18 has been removed from the ASLB 18 as the same are
proposed to be covered in the „Conceptual Framework for General
Purpose Financial Reporting in Local Bodies‟.
3 Paragraph 3 of IPSAS 18 which provides that Government Business
Enterprises should use IFRSs, has been deleted, as it is not relevant
for the ASLB 18, which is applicable to Local Bodies in India.
However, paragraph number has been retained in ASLB 18 in order to
maintain consistency with IPSAS 18.
4 Certain examples given in the IPSAS 18 have been deleted/ modified
and illustrative example given in Appendix A of the IPSAS 18 has been
modified in the ASLB 18 in order to make them more relevant for the
Local Bodies in India.
5 ASLB 18 provides the threshold limit for the number of segments that
are required to be reported, i.e., not more than ten segments are to be
reported. IPSAS 18 does not provide the same.
6 ASLB 18 contains additional guidance for identification of the primary
and secondary segments as compared to the IPSAS 18.
7 As per IPSAS 18, the statement showing changes in net assets/equity
is included as separate statements in the complete set of the financial
statements in line with IPSAS 1. The said requirement has been
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Segment Reporting
modified in the ASLB 18 in line with the ASLB 1 which prescribes that
the statement of changes in equity is to be annexed to the balance
sheet.
8 In case of change in accounting policies adopted for the segment,
IPSAS 18 requires to restate the comparative information for each
segment unless it is impracticable to do so. The said requirement has
been removed in the ASLB 18 in line with the ASLB 3.
9 Paragraphs pertaining to Effective Date have been deleted as the
ASLB 18 would become mandatory for the Local Bodies in a State
from the date specified by the State Government concerned.
10 Consequential changes in the ASLB 18 have been made due to all
above changes. However, paragraph numbers have been retained to
maintain consistency with the corresponding IPSAS.
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Compendium of Accounting Standards for Local Bodies (ASLBs)
Appendix 2
Note: This Appendix is not a part of the Accounting Standard for Local
Bodies. The purpose of this Appendix is only to bring out the major
differences, if any, between Accounting Standard for Local Bodies (ASLB) on
Segment Reporting and the corresponding existing Accounting Standard
(AS) 17, „Segment Reporting‟ (Issued 2000).
Major differences between the ASLB 18, ‘Segment
Reporting’, and existing AS 17 (issued 2000)
1. ASLB 18 is based on the corresponding IPSAS which require entities
to report segments on a basis appropriate for assessing past
performance and making decision about allocation of resources.
Whereas, the corresponding existing AS requires segments to be
reported on the basis of risk and reward.
2. Additional commentary to that in existing AS 18 is there in order to
clarify the applicability of the Standard to Local Bodies.
3. In certain circumstances, different terminology has been used in ASLB
18 such as „Income and Expenditure Statement‟ in place of „Profit and
Loss Account‟, and „Governing Body‟ and „Authorised Senior Official‟
in place of „Board of Directors‟ and „Chief Executive Officer‟,
respectively.
4. ASLB 18 provides that where the entity report to the Governing body
on the basis of more than one segment structure, in that case both
segments may be reported in form of matrix or separately in form of
primary and secondary segment reporting structure with only limited
disclosure made about secondary segments whereas as per AS 17
reportable segments are classified as primary and secondary
segments on basis of risk and return.
5. ASLB 18 does not require entities to disclose segment results whereas
as per AS 17 the segment results are to be disclosed.
238