Home › CA Final › financialreporting › operatingsegments › A transport company runs three segments: Local R…
A transport company runs three segments: Local Route (contracted by the local transport authority; fares set by authority; charged per kilometre), Inter-city Route (the company sets fares; exposed to passenger demand), and Contract Hiring (long-term school leases). Local profits are declining; Inter-city profits are rising. Management proposes aggregating Local + Inter-city. Under Ind AS 108, aggregation is:
APermitted at management's full discretion regardless of the underlying differences
BNot permitted — although products are similar, the type/class of customer and the regulatory environment differ materially, so the aggregation criteria are not satisfied
CPermitted only if disclosure flags that the aggregated segments are heterogeneous
DPermitted — both are bus transport services with similar production processes
Answer & Solution
Correct answer: B. Not permitted — although products are similar, the type/class of customer and the regulatory environment differ materially, so the aggregation criteria are not satisfied
Para 12's aggregation criteria require similarity in nature of products, production processes, CLASS OF CUSTOMER, distribution methods, and regulatory environment. Local Route's customer is the local authority (no passenger-revenue risk; tariff-controlled), while Inter-city's customer is retail passengers (full passenger-revenue exposure; company-set fares). The class-of-customer and regulatory-environment tests fail — and aggregation would conceal the divergent profitability trends, defeating Ind AS 108's purpose.
Related questions
An entity measures pension expense for its segments on a CASH-PAYMENT basis (the basis useA finance segment derives a MAJORITY of its revenues from interest, and the CODM relies prAn entity changes its internal organisation, causing the composition of its REPORTABLE SEGA segment was reportable in the prior period but does NOT meet quantitative thresholds in An entity's operations are spread across many regions, each contributing less than 5% to eInd AS 108 applies a 10% test on REPORTED PROFIT OR LOSS. The denominator (i.e., the base X Ltd. operates in both product lines (A and B, worldwide) and geographical areas, with maIf a parent within the scope of Ind AS 108 publishes BOTH its consolidated and its separat