Significance of Internal Sales in Calculating Turnover for Segment Reporting Criteria
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- By Taxmann
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- Last Updated on 21 November, 2023
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Para 27 of AS 17, Segment Reporting, states that a business segment or geographical segment should be identified as a reportable segment if :
i) its revenue from sales to external customers and from transactions with other segments is 10 percent or more of the total revenue, external and internal, of all segments; or
ii) its segment result, whether profit or loss, is 10 percent or more of –
(a) the combined result of all segments in profit, or
(b) the combined result of all segments in loss,
whichever is greater in absolute amount; or
iii) its segment assets are 10 percent or more of the total assets of all segments.
An entity providing a segment report along with the financial statement, shall identify the reportable segments in accordance with para 27. These internal sales to other departments will be counted as eligible sales under the criteria prescribed. This story will discuss whether internal sales are considered for the purpose of calculating turnover to identify the reportable segment through a case study.
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