Ind AS 108: Operating Segments — Detailed Guide

Standard orientation

What Ind AS 108 is designed to achieve

Require disclosure enabling users to evaluate the nature and financial effects of business activities and the economic environments in which an entity operates.

Scope: Applies to separate or individual financial statements of entities with publicly traded debt or equity instruments, entities filing for a public offering and consolidated financial statements of groups with a qualifying parent. Voluntary segment information must comply fully if described as segment information.

Operating segment

Business component with revenues/expenses, CODM review and discrete financial information.

CODM

Function that allocates resources and assesses segment performance.

Reportable segment

Meets qualitative aggregation and/or quantitative thresholds, plus the 75% external-revenue test.

Management measure

Segment amounts follow measures reported internally to the CODM, with reconciliations to Ind AS totals.

Reading method: Requirements are paraphrased and grouped where they form one integrated rule. Apply the current notified standard for final conclusions.

Full standard map

Paragraph-by-paragraph register

Paragraphs	Requirement and simple decode
1	Core principle Disclose information enabling evaluation of business activities and economic environments.
2–4	Scope Defines mandatory entities, consolidated-group presentation and conditions for voluntary segment disclosure.
5	Operating segment definition A component earns revenues/incurs expenses, is regularly reviewed by the CODM and has discrete financial information.
5(a)	Revenue and expense condition A segment may include start-up operations not yet earning external revenue if internal revenues or expenses exist.
5(b)	CODM review The CODM regularly reviews operating results to allocate resources and assess performance.
5(c)	Discrete information Sufficient financial information must be available for the component.
6	Items not necessarily segments Head office, incidental functions and post-employment benefit plans may not be operating segments.
7	CODM function CODM identifies a resource-allocation and performance-assessment function, often the CEO, COO or executive committee.
8–9	Matrix organisations When multiple segment sets exist, determine which components constitute operating segments based on core principle, internal reporting and management responsibility.
10	Segment managers Segment managers maintain direct contact with the CODM and discuss operating results, forecasts and plans.
11	Reportable segments Report separately operating segments identified under paragraphs 5–10 or resulting from permitted aggregation and quantitative thresholds.
12	Aggregation criteria Segments may be aggregated only when consistent with the core principle, economically similar and similar in products/services, processes, customers, distribution and regulatory environment.
13(a)	Revenue threshold Report when segment revenue, including internal revenue, is at least 10% of combined internal and external segment revenue.
13(b)	Profit/loss threshold Report when absolute profit or loss is at least 10% of the greater absolute combined profit of profitable segments or combined loss of loss-making segments.
13(c)	Asset threshold Report when segment assets are at least 10% of combined segment assets.
14	Combining below-threshold segments May combine only when economically similar and sharing a majority of aggregation criteria.
15	75% external-revenue test Add reportable segments until at least 75% of external revenue is included.
16	All other segments Combine remaining business activities and disclose sources of included revenue.
17	Practical limit When reportable segments exceed ten, consider whether a practical presentation limit has been reached.
18–19	Consistency and prior periods Continue separate reporting when significance remains; restate prior periods when a previously unreported segment becomes reportable unless information is unavailable and cost excessive.
20–21	Disclosure objective and periods Provide segment disclosures for annual periods and specified interim periods.
22	General information Disclose identification factors, management organisation basis, products/services and aggregation judgements.
23	Profit/loss, assets and liabilities Report CODM measures and specified amounts when included in or regularly provided with those measures.
24	Asset disclosures Disclose investments in associates/JVs and additions to non-current assets by segment when regularly provided to the CODM.
25	Measurement basis Use amounts reported to the CODM for resource allocation and performance assessment.
26	Allocation consistency Allocate jointly used assets only when related revenues and expenses are also allocated.
27	Measurement disclosures Explain accounting basis, differences from Ind AS, asymmetrical allocations, changes in methods and nature of reconciling items.
28	Reconciliations Reconcile segment revenue, profit/loss, assets, liabilities and other material items to entity totals.
29–30	Restatement Restate prior segment information when internal organisation changes unless unavailable and excessively costly; disclose whether restated.
31	Entity-wide disclosures Provide product/service, geographical and major-customer information even when only one reportable segment exists, subject to availability and cost.
32	Products and services Disclose external revenue for each product/service or group of similar products/services.
33	Geographical information Disclose external revenue and specified non-current assets by country of domicile and material foreign countries.
34	Major customers Disclose reliance on a single external customer representing 10% or more of revenue, without naming the customer.
35–37	Transition and effective-date history Tracks amendments and comparative relief; current reporting follows the notified text.

Major areas decoded

Technical requirements in simple language

Management approach

Segment reporting starts with internal packages, not legal entities or product labels. The same management measures can differ from Ind AS measures if reconciled transparently.

CODM is a function

The CODM can be an executive committee. Minutes, packs, budgets and resource-allocation evidence are more persuasive than titles.

Matrix organisations

When management reviews both geography and product lines, identify the segment set whose managers are held accountable and whose reporting best satisfies the core principle.

Aggregation is a high hurdle

Similar long-term margins and economic characteristics are essential; sharing customers or products alone is insufficient.

Threshold sequence

Apply aggregation criteria, then 10% thresholds, then the 75% external-revenue test. Management can separately disclose useful below-threshold segments.

CODM measure

The standard does not force a single EBITDA definition. It requires the measure actually used internally and clear explanation of differences.

Entity-wide disclosures

Product, geography and customer disclosures can be required even if the entity has only one reportable operating segment.

Visual learning

Finin2min decision map

Editable SVG and high-resolution PNG versions are included in this batch.

Exceptions and highlights

What professionals frequently overlook

A corporate headquarters is not automatically an operating segment.
A start-up activity can be an operating segment before external revenue begins.
The CODM is a function, not necessarily one individual.
Legal entities do not automatically equal operating segments.
Aggregation requires similar economic characteristics and the listed qualitative similarities.
The 10% thresholds are not the final test because the 75% rule can add segments.
Major customers need not be named.
Voluntary segment information described as such must comply with the entire standard.

Practical application

Transaction examples

Fact pattern

Treatment

Reason

Regional divisions reviewed separately by executive committee

Operating segments

Discrete results are used for resource allocation.

Head-office treasury function with incidental income

Usually not a segment

It may not earn segment revenues or be reviewed as an operating business.

Two products with similar customers but different long-term margins

Do not aggregate

Economic characteristics are not similar.

Segment has 8% revenue but 15% assets

Reportable

Meeting any one 10% threshold is sufficient.

Reportable segments cover only 68% external revenue

Add segments

Continue until at least 75% is covered.

One customer provides 14% revenue across three segments

Major-customer disclosure

Disclose total revenue and affected segments without naming the customer.

Accounting mechanics

Illustrative journal entries

Entries are simplified and may require tax, fair-value or presentation adjustments.

Disclosure-only standard

Ind AS 108 normally creates no journal entry by itself.

Internal allocation adjustment

No statutory entry is required solely because a CODM measure reallocates costs.

Change in segment structure

Restate disclosures; underlying ledger entries remain governed by other standards.

Reconciliation difference

Explain in notes rather than post an artificial accounting entry.

CA / finance / boardroom cases

Applied case studies

1. Executive committee CODM

Applied case

No single executive has final authority; a committee jointly approves budgets and capex.

Finin2min analysis: The committee can be the CODM because the term identifies the decision-making function.

2. Matrix reporting

Applied case

The CEO reviews products monthly and geographies quarterly, while product heads are accountable for profit.

Finin2min analysis: Product components are likely operating segments, but analyse all internal reporting and accountability evidence.

3. Aggregation

Applied case

Two retail segments share stores and customers, but one has stable 25% margins and the other cyclical 5% margins.

Finin2min analysis: Do not aggregate without evidence of similar long-term economic characteristics.

4. Segment becomes reportable

Applied case

A digital business grows to 12% of consolidated revenue.

Finin2min analysis: Report separately and restate prior information unless unavailable and excessively costly.

5. Management-defined EBITDA

Applied case

CODM receives EBITDA excluding share-based compensation and restructuring.

Finin2min analysis: The measure can be disclosed if actually used, but explain exclusions and reconcile to consolidated profit.

Global comparison

Ind AS versus IFRS and US GAAP

Topic	Ind AS	IFRS	US GAAP
Core model	Management approach based on CODM reporting.	Broadly aligned with IFRS 8.	ASC 280 is closely aligned but has detailed differences in aggregation and measure disclosure.
Quantitative thresholds	10% tests plus 75% external-revenue coverage.	Aligned.	Broadly similar under ASC 280.
CODM	Function, not title.	Aligned.	Same broad concept, with evolving US disclosure requirements.
Segment measure	CODM measure with reconciliations.	Aligned.	US GAAP requires the measure reported to CODM and additional expense information under recent amendments.
Entity-wide data	Products, geography and major customers.	Aligned.	Broadly similar.

Implementation lens

Implications for key stakeholders

CEO/CODM office

Confirm packs and resource-allocation process.

FP&A

Maintain segment measures and reconciliations.

Finance

Validate thresholds, aggregation and restatements.

Investor relations

Explain business model and segment changes.

Audit committee

Challenge aggregation and CODM evidence.

Quality-control watchlist

Common errors and exam traps

Assuming legal entities are operating segments.
Naming the CEO as CODM without evidence of resource-allocation function.
Ignoring start-up operations.
Aggregating solely because products or customers are similar.
Failing to test similar economic characteristics.
Applying only the 10% thresholds and ignoring the 75% rule.
Using an externally invented profit measure rather than the CODM measure.
Not reconciling segment measures to Ind AS totals.
Omitting entity-wide disclosures for a single-segment entity.
Failing to restate prior periods after organisational change.
Naming a major customer unnecessarily.
Not explaining changes in measurement methods.

Finin2min Q&A

Frequently asked questions

1. Who is the CODM?

The function that allocates resources and assesses segment performance.

2. Are legal subsidiaries automatically segments?

No.

3. Can loss-making segments be reportable?

Yes.

4. What is the 75% rule?

Reportable segments must cover at least 75% of external revenue.

5. Can segments be aggregated?

Only when the core principle, economic similarity and qualitative criteria are met.

6. Are product and geography disclosures required with one segment?

Generally yes, subject to availability and excessive-cost provisions.

Two-minute revision

Finin2min cheat sheet

INTERNAL COMPONENT → CODM REVIEW → DISCRETE DATA → AGGREGATION TEST → 10% TESTS → 75% COVERAGE → RECONCILE

Validation register

Primary and authoritative sources

ICAI Compendium 2025–26 — Volume IPrimary or authoritative validation source.
Open source ↗

ICAI Educational Material — Ind AS 108Primary or authoritative validation source.
Open source ↗

IFRS Foundation — IFRS 8Primary or authoritative validation source.
Open source ↗

Review date: 26 June 2026. Recheck later MCA notifications and ICAI compendiums before applying to a later reporting period.