Click to edit Master subtitle style

SEGMENT REPORTING AND DEFERRED TAXES

5/5/12

SEGMENT REPORTING:
The segment report is prepared as per AS-17 which is mandatory and effective for accounting period starting on or after 1.04.2001.

5/5/12

Objective
The objective of this statement is to establish principles for reporting financial information, about the different types of products and services an enterprise produces and the different geographical areas in which it operates.
5/5/12

UTILITY /advantages
Such information helps the users of the financial statements :
v v v

To better understand the performance of the enterprise To better assess the risks and returns of the enterprise To make more informed judgements about the enterprise as a whole.

5/5/12

APPLICABILITY
Level 1 Enterprises :
v

Enterprises whose equity or debt securities are listed whether in India or outside India Enterprises who are in the process of listing their equity or debt securities Banks including co-operative banks Financial institutions

v v v

5/5/12

Enterprises carrying on Insurance business Enterprises whose turnover is above 50 crores Enterprises having borrowings in excess of 10 crores at any time during the accounting period. Holding companies and subsidiaries of enterprises falling under any one of the categories mentioned above.

v v

5/5/12

Level 2 Enterprises :
v v

Enterprises whose turnover exceeds 40 lakhs but not 50 crores Enterprises having borrowings in excess of 1 crore but not in excess of 10 crores at any time during the accounting period. Holding companies and subsidiaries falling under any 1 one of the above categories
5/5/12

Level 3 Enterprises :
v

Enterprises which are not covered under level 1 and level 2 .

5/5/12

CLASSIFICATION

5/5/12

BUSINESS SEGMENTS
Definition : It is a distinguishable component of an enterprise that is engaged in providing an individual product or service or a group of products or services, and that is subject to risk and return as distinctly different from those of other business segments.
5/5/12

GEOGRAPHICAL SEGMENT
Definition: It is a distinguishable component of an enterprise that is engaged in providing products or services within a particular environment and that it is subject to risks and returns that are different from those of components operating in other economic environments.
5/5/12

FACTORS DETERMINING SEGMENTS

The factors that should be considered in identifying geographical segments:
v v v

Similarity of economic and political conditions The relationship between operations in different geographical areas Proximity of operations

5/5/12

v v v

Special risks associated operations in a particular area Exchange control regulations The underlying currency risks

with

5/5/12

AS 22 ACCOUNTING FOR TAXES ON INCOME

As per AS 22 tax should be accounted by following the principle of Matching Concept i.e. tax should be accounted in the period in which the corresponding revenue and expenses are accounted.
5/5/12

There is a difference between the accounting profit and the taxable profit due to the following reasons: v Timing difference v Permanent difference

5/5/12

Timing difference will lead to either Deferred Tax Asset or Deferred Tax Liability.
v

Deferred Tax Asset arises when accounting profit is less than taxable profit.

Deferred Tax Liability arises when accounting profit is more than taxable 5/5/12 profit.

DISCLOSURE
v

The break-up of deferred tax asset / liability should be disclosed. Incase of deferred tax asset arising out of unabsorbed depreciation or loss, evidence supporting recognition should be disclosed

5/5/12

It should be disclosed separately from current assets / liabilities. They should be distinguished from advance tax/ tax provision / tax refund due. Deferred tax asset and liability should be set off if permissible under the tax laws but to be shown separately if not permissible.

5/5/12