Ind AS 108 Operating Segments: A Practitioner Guide for FY 2026-27
Ind AS 108 (Operating Segments) is the Indian Accounting Standard that requires listed companies and those in the listing process to disclose segment information based on how management internally organises and assesses business activities.
The Ministry of Corporate Affairs notified Ind AS 108 via the Companies (Indian Accounting Standards) Rules, 2015. It became mandatory from 1 April 2016 for Phase I companies. Ind AS 108 replaced AS 17 (Segment Reporting) for Ind AS-applicable entities.
For FY 2026-27, conglomerates and diversified businesses must pay close attention to aggregation criteria and the identification of the Chief Operating Decision Maker (CODM). Patron's clients in the manufacturing sector have found that improper segment identification often leads to regulatory scrutiny.
Ind AS 108 at a Glance
Ind AS 108 prescribes the management approach for segment reporting. It requires listed companies to report financial information about operating segments as reviewed by their CODM. This standard primarily serves listed entities and those preparing for a public listing in India.
| Field | Value |
|---|---|
| Standard Number | Ind AS 108 |
| Full Name | Operating Segments |
| Issuing Body | ICAI (Accounting Standards Board) |
| Notified By | MCA, Companies (Indian Accounting Standards) Rules, 2015, dated 16 February 2015 |
| Effective Date | 1 April 2015 (voluntary), 1 April 2016 (mandatory Phase I) |
| Supersedes | AS 17 (Segment Reporting) for Ind AS-applicable entities |
| Equivalent Standard | AS 17 ↔ Ind AS 108 ↔ IFRS 8 |
| Applies To | Listed companies and entities in process of listing. Other Ind AS-applicable companies not in this category not required, though voluntary application is permitted. Ind AS 108 prescribes the management approach to segment reporting. |
What is Ind AS 108: Operating Segments?
Ind AS 108 defines how listed Indian companies must identify and disclose information about their operating segments. The standard requires entities to present segment data using the same structure and measures used by their CODM for internal decision-making.
The Institute of Chartered Accountants of India introduced this standard as part of India's convergence with International Financial Reporting Standards (IFRS). It replaced the risks-and-rewards model under legacy Indian GAAP (AS 17) with a management approach aligned with IFRS 8.
Statutory auditors, CFOs, finance teams in listed companies, and CA students preparing for exams frequently use this standard when preparing or reviewing annual financial statements.
Objective of Ind AS 108
- Enable users to evaluate the nature and financial effects of an entity’s business activities and economic environments.
- Require disclosures based on internal management structure as used by the CODM for resource allocation and performance assessment.
- Mandate reconciliation between segment information and consolidated or standalone totals.
Segment reporting under Ind AS 108 supports a true and fair view by ensuring users receive relevant information reflecting how management views its operations. This aligns with Section 129 of the Companies Act, 2013 regarding fair presentation in financial statements.
Who Must Apply Ind AS 108?
Entities covered, applicability table
Ind AS 108 applies to all listed companies in India and those filing prospectuses for listing on recognised stock exchanges. Other companies adopting Indian Accounting Standards voluntarily may also apply it but are not required unless they fall within SEBI’s listing framework or are otherwise mandated by MCA notification.
| Entity Type | Applicability |
|---|---|
| Listed company | Mandatory |
| In process of listing | Mandatory |
| Voluntary adopter of Ind AS | Voluntary |
| Non-listed company not adopting Ind AS | Not required |
Scope exclusions
- Non-listed companies (voluntary).
- Standalone financial statements where consolidated also presented (consolidated only).
When the standard does not apply
For non-listed entities not adopting Ind AS voluntarily, segment reporting is governed by legacy standards such as AS 17. If both consolidated and standalone financial statements are presented together, only consolidated statements require full compliance with Ind AS 108.
Key Definitions under Ind AS 108
| Term | Definition |
|---|---|
| Operating segment | Component earning revenue/incurring expenses; reviewed by CODM; discrete financials available. |
| Chief operating decision maker (CODM) | Function responsible for resource allocation/performance assessment across segments. |
| Reportable segment | Segment meeting quantitative thresholds or otherwise significant; requires separate disclosure. |
| Aggregation criteria | Conditions allowing combination of segments with similar economics/customers/processes/etc. |
| Entity-wide disclosures | Revenue breakdowns by product/service/geography/major customers regardless of segment design. |
Recognition and Measurement under Ind AS 108
When to recognise
An entity must identify operating segments when it prepares annual or interim financial statements under Indian Accounting Standards and falls within the scope described above. Segment reporting becomes mandatory once an entity is listed or files documents for listing on a recognised exchange.
Segments are determined based on internal reports regularly reviewed by the CODM, typically a CEO, managing director, executive committee or board, who decides resource allocation and performance evaluation (Para 5).
A component qualifies as an operating segment if:
It engages in business activities earning revenue/incurring expenses.
Its results are regularly reviewed by the CODM.
Discrete financial information exists for it.
Quantitative thresholds determine which operating segments become reportable:
Reportable if any one criterion met:
- Revenue (external + inter-segment) ≥10% total
- Absolute profit/loss ≥10% combined
- Assets ≥10% total assets
If reportable segments do not cover at least 75% external revenue, add more until threshold reached (Para 13-15).
Initial measurement
Segment data must be reported using the same accounting policies and measures provided internally to management, even if these differ from those used in consolidated financial statements prepared per other Indian Accounting Standards (Para 25).
This means EBITDA may be reported as “segment profit” if that is what CODM uses internally; depreciation/amortisation or certain allocations may be excluded so long as clear reconciliation is provided later.
If assets/liabilities are reported to CODM at all, these must also be disclosed per segment; otherwise only profit/loss data is required.
Subsequent measurement
For every measure reported at segment level, revenue, profit/loss, assets or liabilities, a reconciliation must be provided back to consolidated totals as per audited accounts (Para 28). This ensures users can trace differences arising from different measurement approaches used internally versus statutory accounts.
When there are changes in segment structure due to reorganisations or changes in internal reporting lines:
Comparatives must be restated accordingly.
The reason for restatement must be disclosed.
Material changes should be explained clearly so users understand year-on-year comparability issues (Para 29).
Materiality applies throughout; insignificant items can be aggregated unless they distort fair presentation.
Management Approach - The Defining Feature
The cornerstone of Ind AS 108 is its “management approach.” Segment identification follows internal management structure rather than any predetermined business/geographical matrix found in earlier standards like AS 17.
Identifying the correct CODM function is critical, this could be a single individual such as a CEO or an executive committee acting collectively.
Aggregation rules permit combining multiple operating segments into one reportable segment only if they share similar economic characteristics across products/services/processes/customer types/margins/regulatory environment (Para 12).
The standard’s quantitative tests ensure only significant segments are separately disclosed while still capturing at least three-fourths of external revenues across all reportable segments.
This management-driven approach ensures that external users see an entity’s operations through “the eyes of management,” enhancing relevance but requiring strict discipline around aggregation criteria and reconciliations.
Worked Examples on Ind AS 108
Example 1: Identification of CODM and operating segments
Narrative:
Maharashtra Holdings operates cement, steel, and logistics businesses. Each has its own CEO who reports up to a Group CEO. The Group CEO and CFO jointly review monthly performance reports from each business line before making resource allocation decisions.
Computation Table:
| Step | Analysis | Outcome |
|---|---|---|
| Identify CODM | Group CEO + CFO jointly review/report/allocate | CODM = Group CEO + CFO |
| Identify segments | Cement / Steel / Logistics each have separate CEOs/reports | Three operating segments |
| Quantitative test | All three meet ≥10% threshold on revenue/assets/profit | Three reportable segments |
Journal Entry:
No accounting entry arises directly from segment identification/disclosure requirements. Segment note in annual report presents each business’s revenue (external + inter-segment), EBITDA or profit figure used internally by CODM, total assets per segment if reported internally, plus reconciliations back to consolidated totals.
Example 2: Aggregation example
Narrative:
Sundaram Engineering runs four product lines, industrial valves, pumps, gauges, motors, all serving large industrial buyers via direct sales channels with similar margins between 8-10%.
Computation Table:
| Step | Analysis | Outcome |
|---|---|---|
| Aggregation criteria applied | Similar products/customers/processes/margins/regulatory context | Meets Para 12 aggregation test |
| Segment grouping | Four lines aggregated into one “Industrial Products” | Single reportable segment |
| Disclosure | Aggregation rationale disclosed in notes | Transparency maintained |
Journal Entry:
No accounting entry arises directly from aggregation; however, notes must clearly state aggregation rationale (“The four product lines are aggregated based on similar economic characteristics...”). Segment note shows combined ‘Industrial Products’ results along with required disclosures per Para 22-34.
Disclosure Requirements under Ind AS 108
Disclosures under Ind AS 108 are critical for users of financial statements, as mandated by Schedule III to the Companies Act, 2013. The standard requires entities to present transparent, management-driven segment information that aligns with internal decision-making. Proper disclosure enables investors and regulators to assess business risks, performance, and resource allocation.
| Item | Requirement | Para Reference |
|---|---|---|
| General information | Factors used to identify reportable segments, types of products and services, segment structure changes | Para 22 |
| Segment profit or loss | External revenue, inter-segment revenue, depreciation/amortisation, interest income/expense, tax, material non-cash items | Para 23 |
| Segment assets and liabilities | If reported regularly to CODM | Para 24 |
| Reconciliation to consolidated totals | For each segment measure (revenue, profit/loss, assets, liabilities) | Para 28 |
| Entity-wide disclosures | Revenue by product/service groups, by geography, major customers (10% threshold) | Para 31-34 |
| Comparative information | Restated for segment structure changes | Para 29 |
Auditors must ensure that these disclosures are complete and accurate in accordance with SA 700 when forming their opinion on true and fair presentation.
Common Mistakes & Industry-Specific Considerations
Common errors auditors flag
- Identifying segments based on past business structure rather than current management reporting structure.
- Failing to identify CODM correctly, common to misidentify someone other than the actual decision-maker.
- Aggregating operating segments without meeting all aggregation criteria.
- Inadequate reconciliation between segment totals and consolidated totals.
- Missing entity-wide disclosures (geographic and major customer) where reportable segments do not provide this information.
- Restating comparatives without disclosing the restatement reasons clearly.
Industry application notes
Conglomerates:
Large diversified groups often face challenges around aggregation. Even if businesses appear similar (e.g., two manufacturing lines), differences in risk profile or returns may prevent valid aggregation under Para 12. Auditors scrutinise such judgements closely.
Banks:
Banks typically report segments by line of business (retail banking, corporate banking) or geography. The Reserve Bank of India’s regulatory reporting often influences segment design but does not override Ind AS 108 requirements. Alignment between internal management reporting and regulatory segmentation is key.
Single-business companies:
Entities with a single operating segment still need to provide entity-wide disclosures such as geographic revenue split and major customer concentration. Many miss this requirement assuming “single segment” means no further disclosure is needed.
Ind AS 108 vs AS 17 vs IFRS: Key Differences
The table below summarises the principal differences in approach between AS 17 (Segment Reporting), Ind AS 108 (Operating Segments), and IFRS 8:
| Aspect | AS 17 | Ind AS 108 | IFRS |
|---|---|---|---|
| Approach | Risks and rewards approach (business or geographic) | Management approach (CODM) | Management approach |
| Quantitative thresholds | Same 10% / 75% tests | Same 10% / 75% tests | Same |
| Segment measurement | Standard accounting measures | Internal management measures permitted with reconciliation | Same as Ind AS |
| Entity-wide disclosures | Limited | Required (Para 31-34) | Required |
| Identification of CODM | Not required concept | Central concept | Central concept |
India has adopted the “management approach” from IFRS 8 almost verbatim in Ind AS 108. The main carve-out is that Indian companies must comply with additional Schedule III disclosure requirements. Otherwise, measurement principles and quantitative thresholds remain fully aligned with international practice.
Latest Amendments to Ind AS 108 (FY 2026-27)
No amendments have been notified to Ind AS 108 for FY 2026-27 as of 2026-05-02. The standard continues to apply in its existing form.
Related Standards You Should Know
- [AS 17](/as-17-segment-reporting/), Equivalent segment reporting standard for non-Ind AS companies; risks and rewards approach.
- [Ind AS 33](/ind-as-33-earnings-per-share/), Segment EPS sometimes reported voluntarily.
- [Ind AS 36](/ind-as-36-impairment-of-assets/), Goodwill allocation to CGUs aligns with segment structure.
- [Ind AS 110](/ind-as-110-consolidated-financial-statements/), Consolidated financial statements basis for segment reporting.
- [Ind AS 105](/ind-as-105-held-for-sale-discontinued-operations/), Discontinued operations interplay with segment reporting.
Need Help with Ind AS 108 Compliance?
Patron Accounting LLP supports listed companies across India in achieving full compliance with Ind AS 108 Operating Segments. Our team combines technical expertise with practical experience from statutory audits and regulatory reviews involving complex conglomerate structures.
Our services include:
- Statutory Audit
- Ind AS Advisory
- Financial Reporting & Schedule III
- Disclosure Review
Schedule a 30-minute consultation with our Ind AS team, Pune · Mumbai · Delhi · Gurugram.
Frequently Asked Questions (FAQs)
Listed companies in India and entities filing for listing on recognised exchanges must apply Ind AS 108. Other companies adopting Indian Accounting Standards voluntarily may also follow it but are not required unless mandated by MCA notification or SEBI regulations.
The management approach requires entities to identify operating segments based on how their chief operating decision maker reviews business performance internally. Segment information mirrors internal reports used for resource allocation and assessment decisions.
While both standards use similar quantitative thresholds for reportable segments, Ind AS 108 follows a management-driven approach based on CODM review rather than predefined business or geographic categories found in AS 17. Entity-wide disclosures are also more extensive under Ind AS 108.
The CODM is the individual or group responsible for allocating resources and assessing performance across segments. This could be a CEO, managing director, executive committee or board, whoever actually makes these strategic decisions within the entity.
An operating segment becomes reportable if it meets any of these criteria: its revenue (including inter-segment) is at least ten percent of total combined revenue; its absolute profit/loss is at least ten percent of combined total; or its assets are at least ten percent of total assets.
Aggregation is permitted only if operating segments share similar economic characteristics, including products/services offered, customer types served, distribution methods used, margins achieved, and regulatory environment, as specified in Para 12 of Ind AS 108.
Regardless of identified reportable segments, every entity must disclose external revenues by product/service groupings, by geographical area (country/region), and details about major customers contributing at least ten percent of total revenues during the period.
For every measure reported at segment level, revenue, profit/loss, assets or liabilities, the entity must provide a clear reconciliation back to consolidated totals per audited financial statements so users can understand differences arising from internal versus statutory accounting policies.
Yes. Even when an entity identifies only one operating segment internally, it must still provide entity-wide disclosures covering geographic revenue splits and significant customer concentrations as required by Paras 31-34 of Ind AS 108.
When there are changes in internal reporting that affect identified segments, such as reorganisations, the prior period’s comparative figures must be restated accordingly. The reason for restatement should be disclosed clearly so users understand year-on-year comparability issues.
About This Article
Reviewed by CA & CS Team · Patron Accounting LLP
Technical reviewer: CA Sundram Gupta, FCA
Last reviewed: 2026-05-02
Sources: ICAI Compendium of Accounting Standards · MCA Notification (Companies (Indian Accounting Standards) Rules, 2015, dated 16 February 2015) · IFRS Foundation