Ind AS 108 Segment Reporting for Growing Companies
Reviewed by Ravi Sisodia · Last reviewed 13 August 2026
Finin2min 2-Minute Summary
- Ind AS 108 follows the management approach: operating segments are identified from the components whose results are regularly reviewed by the chief operating decision maker (CODM) and for which discrete financial information is available.
- A business division is not an operating segment merely because it has a legal entity, product name or internal budget; the CODM review structure matters.
- Quantitative reportability thresholds include 10% tests for revenue, absolute profit/loss and assets, subject to the standard's detailed calculations.
- Reportable segments must collectively cover at least 75% of the entity's external revenue; additional operating segments are identified when needed to reach that coverage.
- Segment measures should reconcile to the financial statements, while disclosed segment amounts are based on the measures actually reported to the CODM, with required reconciliations and entity-wide information.
Start with the packs the CODM actually receives
Finance should obtain the board/CEO/business-review packs and identify who performs the CODM function in substance. The CODM can be a person or group; the title is less important than who allocates resources and assesses performance. An operating segment generally earns revenues/incurs expenses, has results regularly reviewed by the CODM, and has discrete financial information.
Growing businesses often change how they are managed before legal structures change. A company that was once reviewed as one national business may begin managing consumer, enterprise and export operations separately. That management change can alter the segment conclusion even when the legal subsidiaries stay the same.
Threshold tests come after operating segments are identified
Apply the 10% revenue, profit/loss and asset tests to operating segments, including the standard's use of the greater absolute profit/loss benchmark. Segments below the thresholds can still be separately reported when management believes the information is useful and aggregation requirements are not abused.
After selecting reportable segments, perform the 75% external-revenue coverage test. If the reported segments do not cover at least 75% of external revenue, additional segments are identified until the threshold is reached. The finance workbook should preserve both the numerical tests and the qualitative aggregation judgement.
Worked example: SaaS company expands into payments
A growing technology company historically reported one segment to its CEO. During the year, management creates separate SaaS and payments leadership teams, receives separate monthly P&Ls and allocates engineering and marketing budgets independently. Finance should reassess whether two operating segments now exist. The answer should follow the CODM information and decision process, not whether the payments activity has been legally spun into a subsidiary.
Segment close checklist
- Identify the CODM and archive the regular management-information pack.
- Map internal business components to discrete revenue, result and asset information.
- Apply the 10% quantitative thresholds and document qualitative aggregation.
- Run the 75% external-revenue coverage test.
- Reconcile segment revenue, profit/loss, assets and liabilities to entity totals as required.
- Check entity-wide product/service, geographical and major-customer disclosures.
Questions finance teams commonly ask
Is the CODM always the CEO?
No. It is the function that allocates resources and assesses operating-segment performance and may be a person or group.
Does a subsidiary automatically equal a reportable segment?
No. Segment identification follows the management approach and CODM review structure.
What are the main quantitative thresholds?
Ind AS 108 uses 10% tests for revenue, absolute profit/loss and assets, subject to the detailed definitions in the standard.
What is the 75% rule?
External revenue of reportable segments should cover at least 75% of the entity's external revenue; additional segments are reported if needed to reach that level.
Official sources
- ICAI - Ind AS 108 official 2025-26 compendium PDF
- ICAI - Compendium of Indian Accounting Standards 2025-26
- Finin2min Ind AS Hub - broader standard-level reference.
Disclaimer
Educational and professional reference only; confirm the current law, rates and the facts of your case before relying on this page.