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X Ltd. operates in both product lines (A and B, worldwide) and geographical areas, with managers responsible for each set. The CODM regularly reviews both sets and discrete financial information is available for both. Under Ind AS 108, X Ltd. should identify its operating segments by:
AApplying judgement, with reference to the CORE PRINCIPLE — choosing the set that best enables users to evaluate business activities and economic environments
BReporting both sets in parallel as primary and secondary segments
CAlways defaulting to the product-line view, regardless of CODM behaviour
DAlways defaulting to the geographical view, regardless of CODM behaviour
Answer & Solution
Correct answer: A. Applying judgement, with reference to the CORE PRINCIPLE — choosing the set that best enables users to evaluate business activities and economic environments
Para 10 of Ind AS 108 addresses matrix organisations: when both sets of components meet the operating-segment criteria, the entity should determine which set constitutes the operating segments by reference to the core principle — i.e., which view best lets users assess the nature and financial effects of business activities and economic environments. Defaulting to either dimension or reporting both in parallel (the old AS 17 approach) is wrong.
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