BRAND UNIFICATION SALES

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Segment Reporting IGAAP / IFRS / US GAAP
Deven Khanna - Group Financial Controller
Bharti Tele Ventures Ltd
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IGAAP Segmental Reporting IT Company
IGAAP Segmental Reporting IT Company
Primary Business Segments
Primary Geographical Segments
Segment Reporting Judgement Based Reporting
Secondary Geographical Segments
Secondary Business Segments
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Agenda Objectives of Segment Reporting Scope
Applicability Segment Definitions Identifying
Reportable Segments Disclosures
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Objectives
IGAAP IFRS (AS 17 IAS 14) To establish
principles for reporting financial information
about the different products services an
enterprise produces and the different
geographical areas in which it operates
IGAAP / IFRS
Better Assess the enterprises risk returns
US GAAP (FAS 131) To provide information about
the different type of business activities in
which an enterprise engages and the different
economic environments in which it operates
IFRS
Better Understand the enterprises past
performance
US GAAP
Better assess the enterprises prospects for
future net cash flows
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Agenda Objectives of Segment Reporting Scope
Applicability Segment Definitions Identifying
Reportable Segments Disclosures
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Scope Applicability - Entities

• IGAAP
• Enterprises whose equity/debt securities are
  listed on a recognized stock exchange in India
• Enterprises in the process of issuing equity /
  debt securities (BOD Resolution)
• All other enterprises whose turnover exceeds
  Rs.50 Crore
• Banks / Financial Institutions / Insurance
  Companies
• Enterprises having borrowings/public deposits
  exceeding Rs.10 Crore
• Holding Subsidiary of any of above

• IFRS
• Entities whose equity/debt securities are
  publicly traded
• Entities in the process of issuing securities in
  the public markets
• Entities which disclose Segmental information
  voluntarily in financials that comply with IFRS

• US GAAP
• Entities whose equity/debt securities are
  publicly traded on a foreign/domestic/OTC market
• Entities which are required to file financial
  statements with SEC

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Scope Applicability Financials

• IGAAP
• Single Report containing Consolidated / Separate
  financials of parent subsidiaries
• Applicable to Consolidated Financials
• X Not Applicable to separate parent financials
• Applicable to separate subsidiary financials if
  they meet applicability criteria
• Independent financial statements
• Applicable if entity meets criteria

• IFRS
• Single Report containing Consolidated / Separate
  financials of publicly traded Parent
  subsidiaries
• Applicable to Consolidated Financials
• X Not Applicable to separate parent financials
• Applicable to separate subsidiary financials if
  it is also publicly traded
• Single Financial report of a publicly traded
  entity separate financials of equity method
  associate / Joint venture
• Applicable to financials of publicly traded
  entity
• Applicable to separate financials of associate /
  JV is they are also publicly traded

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Scope Applicability Financials

• US GAAP
• Applicable to annual complete sets of financial
  statements and in condensed financial statements
  of an interim period
• Single Report containing Consolidated / Separate
  financials of parent /subsidiaries/associates
• Applicable to Consolidated Financials
• X Not Applicable to separate parent financials
• Applicable to separate subsidiary/associates
  financials if they meet applicability criteria
• Independent financial statements
• Applicable if entity meets criteria

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Agenda Objectives of Segment Reporting Scope
Applicability Segment Definitions Identifying
Reportable Segments Disclosures
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Segment Definitions

• IGAAP IFRS
• Business Segment
• gt Distinguishable component of an enterprise
  engaged in providing related products or services
• gt Subject to risks and returns that are different
  from those of other business segments
• gt Factors considered in determining related
  products / service
• - Nature of Products / Services
• - Nature of Production Process Distribution
  Methods
• - Type / Class of Customers
• - Nature of Regulatory Environment

• Geographical Segment
• gt Distinguishable component of an enterprise
  engaged in providing products or services within
  a
• particular economic environment
• gt Subject to risks and returns, different from
  those operating in other economic environments
• gt Factors considered in identifying geographical
  segments include
• - Similarity of economic and political
  conditions
• - Relationships between operations in different
  geographical areas
• - Proximity of operations
• - Special risks associated with
  operations in a particular area
• - Exchange control regulations

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Segment Definitions

• US GAAP
• Operating Segment
• A Component of an enterprise
• gt That engages in business activity from which it
  earns revenue incurs expenses
• gt Whose operating results are regularly reviewed
  by the enterprises Chief Operating Decision
• Maker
• gt Generally has a Segment Manager Directly
  accountable and maintains regular contact with
  CODM
• gt For which discrete financial information is
  available
• gt It may include start up operations in
  preoperative stages

• Geographical Segment
• gt Companys country of domicile
• gt All foreign countries in total
• gt If amounts of an Individual country are
  material (gt10) it should be reported separately

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Agenda Objectives of Segment Reporting Scope
Applicability Segment Definitions Identifying
Reportable Segments Disclosures
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Identifying Reportable Segments
IGAAP IFRS Primary Secondary
Segments
Primary Segment Governed by Nature of Risks
Returns
Business Segment
Geographical Segment
If Risk Returns effected by different
geographies
If Risks Returns affected by difference in
products
Depending on selection of primary Segment,
secondary segment is selected

• Matrix Approach If Risks Returns are strongly
  affected by both Products Geographies
• Business Segment Primary
• Geographical Segment Secondary

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Disclosures
IGAAP IFRS

• Primary Segment
• Revenue
• Sales to external customers
• Inter segment sales
• Result Profit / Loss
• Assets Liabilities Total carrying value
• Depreciation amortization / Significant non
  cash expenses
• Total cost incurred during the year to acquire
  segment assets (more than one year life)
• Significant Non cash Expenses (Other than
  depreciation amortization)
• Aggregate of Enterprises share of net
  profit/loss of associates and JVs (IFRS Only)
• Reconciliation of Segment numbers to enterprise
  numbers as a whole

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Disclosures
IGAAP IFRS

• Secondary Segment
• Business Segment Primary Segment
• Revenue For external customers by Geographical
  area
• Assets by Geographical area
• Total cost incurred during the year to acquire
  segment assets by Geographical area

• Geographical Segment Primary Segment
• Revenue For external customers by Business
  segment
• Assets by Business segment
• Total cost incurred during the year to acquire
  segment assets by Business segment

• Other Disclosures
• Changes in segment accounting policies
• Business Segment - Types of product / services
  Geographical Segment composition
• Non Mandatory disclosure
• Segment cash flow
• Material segment transaction

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Reportable Segments
IGAAP Segmental Reporting FMCG Company
Primary Business Segments
Secondary Geographical Segments
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Reportable Segments
IGAAP Auto Industry
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Reportable Segments
IGAAP ASI 20 Interpretation Export Company
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Identifying Reportable Segments
US GAAP Reportable Segments are Operating
Segments

• Management Approach
• FAS 131 requires Management Approach to Identify
  Reportable Segments
• Review / Allocation of resources by CODM drives
  segment identification
• CODM is a function rather than a position

• IGAAP / IFRS US GAAP
• Threshold Limits
• Sales Revenue (Internal External) 10 or more
  of total revenue
• Segment Results 10 or more of combined result
• Assets 10 or more of total assets
• Exception - A segment may be designated as a
  reportable segment despite its size
• Total Segmental Revenue lt75 - Identify
  Additional Segments

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Disclosures
US GAAP

• Geographical Segment
• External Revenues
• Long Lived Assets

• Operating Segment
• Revenue
• Sales to external customers
• Inter segment sales
• Segment Result
• Net Income / Loss
• EBIDTA
• Interest Income Expenses
• Depreciation Depletion Amortization
• Share of profits in equity accounting associates
  
• Income tax expense / benefits
• Extraordinary items
• Significant Non Cash Items

• Product Services
• External Revenue
• Each Product / Service
• Group of Product / Service
• Unless Impracticable Fact shall be disclosed

• Customers
• Disclose Extent of Reliance on major customers
• Revenue from Single Customer gt10
• Disclose the fact
• Identify the segment to which the customer
  relates

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Reportable Segments
US GAAP Case Study

• Company A Consumer Products Company
• Four Brands/Products P1,P2,P3 P4
• Sales Territories Europe, Asia Americas
• Business Units Sales ()
• Unit 1 - Domestic Americas Division 4 Mkt
  Units 50 Sales
• Unit 2 - International Division 4 Units - 30
  Sales
• Unit 3 - Other Accessories Domestic Americas
  4 Units - 20 Sales
• Manufacturing Facilities 6 Company Owned /
  Multiple Suppliers

Step 1 Identify CODM
Operating Committee
CEO
President BU 1
CFO, HR Head, Legal Council
President BU 2
President BU 3
M1
M2
M3
M4
M5
M6
M7
M8
M9
M10
M11
M12
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Reportable Segments
Step 2 Information reported to CODM
Marketing Units
M1
M2
M3
M4
M5
M6
M7
M8
M9
M10
M11
M12
BU1
BU2
BU3
Monthly Operating Reports
CODM Operating Committee

• Step 3 Information Reported
• The following information is reported for each
  Marketing Unit Split at Product Level
• Sales
• Operating Income
• Percentage of Sales
• EBIDTA
• Working Capital

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Reportable Segments

• Step 4 Identification of Operating Segments
• Aggregation of Units
• Two or more operating segments may be aggregated
  into a single segment
• if they are similar in each of the following
  areas
• Nature of Products Services
• Nature of Production Process
• Type and class of customers
• Distribution methods
• Nature of Regulatory Environment

• Decision Points
• Can Mkt. Units in Domestic Americas Division
  be Aggregated ?
• Can International Mkt Units be Aggregated with
  Domestic American ?
• Can All Mkt. Units be Aggregated Single
  Segment Company ?
• Can Other Accessories Unit be aggregated with
  other Units ?

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Reportable Segments
Step 5 Operating Segments
Operating Segment 1 Locations gt Domestic
Americas gt International Division Products gt
All Products Other than Other Accessories
Operating Segment 2 Locations gt Domestic
Americas Products gt Other Accessories
Step 6 Disclosures gt Sales Revenue gt Segment
Results EBIDTA gt Segment Assets gt
Reconciliation of Segment EBIDTA to Consolidated
PBT