PROJECT REPORT ON

“Accounting Standard 17- Its Application in Corporate Sector”

Submitted toUniversity of Mumbai

In Partial Fulfillment of the Requirement

For

M.Com (Accountancy) Semester IIIn the subject

Financial Accounts

By

Name of the student : - Vivek ShriramMahajanRoll No. : - 14 -7288

Name and address of the collegeK. V. Pendharkar College

Of Arts, Science & CommerceDombivli (E), 421203

APRIL 2015

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DECLARATION

I VIVEK SHRIRAM MAHAJAN Roll No. 14 – 7288, the student of

M.Com (Accountancy) Semester II (2015), K. V. Pendharkar College,

Dombivli, Affiliated to University of Mumbai, hereby declare that the project

for the subject Financial Accounts titled “Accounting Standard 17- Its

Application in Corporate Sector” submitted by me to University of Mumbai,

for semester II examination is based on actual work carried by me.

I further state that this work is original and not submitted anywhere else for any examination.

Place : Dombivli

Date:

Signature of the Student

Name: - Vivek Shriram Mahajan Roll No: - 14 -7288

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ACKNOWLEDGEMENT

It is a pleasure to thank all those who made this project work possible.

I Thank the Almighty God for his blessings in completing this task. The successful completion of this project is possible only due to support and cooperation of my teachers, relatives, friends and well-wishers. I would like to extend my sincere gratitude to all of them.

I am highly indebted to Principal A.K.Ranade, Co-ordinater P.V.Limaye, and my subject teacher Tejashree Gawde for their encouragement, guidance and support.

I also take this opportunity to express sense of gratitude to my parents for their support and co-operation in completing this project.

Finally I would express my gratitude to all those who directly and indirectly helped me in completing this project.

Name of the studentVivek Shriram Mahajan

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TABLE OF CONTENTS

CHAPTER No Topic Page no

CHAPTER 1 Introduction

Introduction to Subject …………………………Definition of Accounting Standard…………

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CHAPTER 2 Types of Accounting Standard

List of Indian Accounting Standards........……… 6

CHAPTER 3 Introduction to Segment Reporting

Definitions....................................................Objective.......................................................Scope.............................................................

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CHAPTER 4 Advantages & Disadvantages of Segment Reporting

Advantages …………………...................Disadvantages……………………............Chief Operating Decision Maker.................

202021

CHAPTER 5 Application in Corporate Sector

Application in Tata Group................................ 22

Conclusion 28

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CHAPTER 1: Introduction

Introduction to Subject

Indian Accounting Standards (abbreviated as India AS) are a set of accounting standards notified by the Ministry of Corporate Affairs which are converged with International Financial Reporting Standards (IFRS). These accounting standards are formulated by Accounting Standards Board of Institute of Chartered Accountants of India. Now India will have two sets of accounting standards viz. existing accounting standards under Companies (Accounting Standard) Rules, 2006 and IFRS converged Indian Accounting Standards (Ind AS). The Ind AS are named and numbered in the same way as the corresponding IFRS. NACAS recommend these standards to the Ministry of Corporate Affairs. The Ministry of Corporate Affairs has to spell out the accounting standards applicable for companies in India. As on date the Ministry of Corporate Affairs notified 35 Indian Accounting Standards(Ind AS).This shall be applied to the companies of financial year 2015-16 voluntarily and from 2016-17 on a mandatory basis. Based on the international consensus, the regulators will separately notify the date of implementation of AS Ind for the banks, insurance companies etc. Standards for the computation of Tax would be notified separately.

A principle that guides and standardizes accounting practices. The Generally Accepted Accounting Principles (GAAP) are a group of accounting standards that are widely accepted as appropriate to the field of accounting. Accounting standards are necessary so that financial statements are meaningful across a wide variety of businesses; otherwise, the accounting rules of different companies would make comparative analysis almost impossible.

INVESTOPEDIA EXPLAINS 'ACCOUNTING STANDARD

An accounting standard is a guideline for financial accounting, such as how a firm prepares and presents its business income and expense, assets and liabilities. The Generally Accepted Accounting Principles is comprised of a large group of individual accounting standards. GAAP standards apply to financial reporting in the United States and may be eventually phased out in favor of the International Accounting Standards.

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CHAPTER 2: Types of Accounting Standard

List of Indian Accounting Standards

The following are the mandatory of Accounting Standards (AS) as on July 1, 2012 as listed on the site of The Institute of Chartered Accountants of India (ICAI)

AS 1 Disclosure of Accounting Policies

AS 2 Valuation of Inventories

AS 3 Cash Flow Statement

AS 4 Contingencies and Events Occurring after the Balance Sheet Date

AS 5 Net Profit or Loss for the period, Prior Period Items and Changes in Accounting Policies

AS 6 Depreciation Accounting

AS 7 Construction Contract

AS 8 Accounting for Research and Development (AS-8 is no longer in force since it was merged with AS-26)

AS 9 Revenue Recognition

AS 10 Accounting for Fixed Assets

AS 11 The Effects of Changes in Foreign Exchange Rates (revised 2003)

AS 12 Accounting for Government Grants

AS 13 Accounting for Investments

AS 14 Accounting for Amalgamations

AS 15 Employee Benefits (revised 2005)

AS 16 Borrowing Costs

AS 17 Segment Reporting

AS 18 Related Party Disclosures

AS 19 Leases

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AS 20 Earnings per Share

AS 21 Consolidated Financial Statements

AS 22 Accounting for Taxes on Income

AS 23 Accounting for Investments in Associates in Consolidated Financial Statements

AS 24 Discontinuing Operations

AS 25 Interim Financial Reporting

AS 26 Intangible Assets

AS 27 Financial Reporting of Interests in Joint Ventures

AS 28 Impairment of Assets

AS 29 Provisions, Contingent Liabilities and Contingent Assets

AS 30 Financial Instruments: Recognition and Measurement and Limited

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CHAPTER 3: Introduction to Segment Reporting

This Accounting Standard is not mandatory for Small and Medium Sized Companies, as defined in the Notification. Such companies are however encouraged to comply with the Standard.

Definitions

The following terms are used in this Standard with the meanings specified:

A business segment is a distinguishable component of an enterprise that is engaged in providing an individual product or service or a group of related products or services and that is subject to risks and returns that are different from those of other business segments. Factors that should be considered in determining whether products or servicesare related include:

(a) the nature of the products or services;

(b) the nature of the production processes;

(c) the type or class of customers for the products or services;

(d) the methods used to distribute the products or provide the services; and

(e) if applicable, the nature of the regulatory environment, for example, banking, insurance, or public utilities.

A geographical segment is a distinguishable component of an enterprise that is engaged in providing products or services within a particular economic environment and that is subject to risks and returns that are different from those of components operating in other economic environments. Factors that should be considered in identifying geographical segments include:

(a) similarity of economic and political conditions;

(b) relationships between operations in different geographical areas;

(c) proximity of operations;

(d) special risks associated with operations in a particular area;

(e) exchange control regulations; and

(f) the underlying currency risks.

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A reportable segment is a business segment or a geographical segment identified on the basis of foregoing definitions for which segment information is required to be disclosed by this Standard.

Enterprise revenue is revenue from sales to external customers as reported in the statement of profit and loss.

Segment revenue is the aggregate of

(i) the portion of enterprise revenue that is directly attributable to a segment,

(ii) the relevant portion of enterprise revenue that can be allocated on a reasonable basis to a segment, and

(iii) revenue from transactions with other segments of the enterprise.

Segment revenue does not include:

(a) extraordinary items as defined in AS 5, Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies;

(b) interest or dividend income, including interest earned on advances or loans to other segments unless the operations of the segment are primarily of a financial nature; and

(c) gains on sales of investments or on extinguishment of debt unless the operations of the segment are primarily of a financial nature.

Segment expense is the aggregate of

(i) the expense resulting from the operating activities of a segment that is directly attributable to the segment, and

(ii) the relevant portion of enterprise expense that can be allocated on a reasonable basis to the segment, including expense relating to transactions with other segments of the enterprise.

Segment expense does not include:

(a) Extraordinary items as defined in AS 5, Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies;

(b) interest expense, including interest incurred on advances or loans from other segments, unless the operations of the segment are primarily of a financial nature;

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Explanation:

The interest expense relating to overdrafts and other operating liabilities identified to a particular segment are not included as a part of the segment expense unless the operations of the segment are primarily of a financial nature or unless the interest is included as a part of the cost of inventories. In case interest is included as a part of the cost of inventories where it is so required as per AS 16, Borrowing Costs, read with AS 2, Valuation of Inventories, and those inventories are part of segment assets of a particular segment, such interest is considered as a segment expense. In this case, the amount of such interest and the fact that the segment result has been arrived at after considering such interest is disclosed by way of a note to the segment result.

(c) losses on sales of investments or losses on extinguishment of debt unless the operations of the segment are primarily of a financial nature;

(d) income tax expense; and

(e) general administrative expenses, head-office expenses, and other expenses that arise at the enterprise level and relate to the enterprise as a whole. However, costs are sometimes incurred at the enterprise level on behalf of a segment. Such costs are part of segment expense if they relate to the operating activities of the segment and if they can be directly attributed or allocated to the segment on a reasonable basis.

Segment result is segment revenue less segment expense.

Segment assets are those operating assets that are employed by a segment in its operating activities and that either are directly attributable to the segment or can be allocated to the segment on a reasonable basis.

If the segment result of a segment includes interest or dividend income, its segment assets include the related receivables, loans, investments, or other interest or dividendgenerating assets.

Segment assets do not include income tax assets.

Segment assets are determined after deducting related allowances/ provisions that are reported as direct offsets in the balance sheet of the enterprise.

Segment liabilities are those operating liabilities that result from the operating activities of a segment and that either are directly attributable to the segment or can be allocated to the segment on a reasonable basis.

If the segment result of a segment includes interest expense, its segment liabilities include the related interest-bearing liabilities.

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Segment liabilities do not include income tax liabilities.

Segment accounting policies are the accounting policies adopted for preparing and presenting the financial statements of the enterprise as well as those accounting policies that relate specifically to AS 17.

The organisational and internal reporting structure of an enterprise will normally provide evidence of whether its dominant source of geographical risks results from the location of its assets (the origin of its sales) or the location of its customers (the destination of its sales). Accordingly, an enterprise looks to this structure to determine whether its geographicalsegments should be based on the location of its assets or on the location of its customers.

Determining the composition of a business or geographical segment involves a certain amount of judgement. In making that judgement, enterprise management takes into account the objective of reporting financial information by segment as set forth in this Standard and the qualitative characteristics of financial statements as identified in the Framework for the Preparation and Presentation of Financial Statements issued by the Institute of Chartered Accountants of India. The qualitative characteristics include the relevance, reliability, and comparability over time of financial information that is reported about the different groups of products and services of an enterprise and about its operations in particular geographicalareas, and the usefulness of that information for assessing the risks and returns of the enterprise as a whole.

The predominant sources of risks affect how most enterprises are organised and managed. Therefore, the organisational structure of an enterprise and its internal financial reporting system are normally the basis for identifying its segments.

The definitions of segment revenue, segment expense, segment assets and segment liabilities include amounts of such items that are directly attributable to a segment and amounts of such items that can be allocated to a segment on a reasonable basis. An enterprise looks to its internal financial reporting system as the starting point for identifying those items that can be directly attributed, or reasonably allocated, to segments. There is thus a presumption that amounts that have been identified with segments for internal financial reporting purposes are directly attributable or reasonably allocable to segments for the purpose of measuring the segment revenue, segment.

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In some cases, however, a revenue, expense, asset or liability may have been allocated to segments for internal financial reporting purposes on a basis that is understood by enterprise management but that could be deemed arbitrary in the perception of external users of financial statements. Such an allocation would not constitute a reasonable basis under the definitions of segment revenue, segment expense, segment assets, and segment liabilities in this Standard. Conversely, an enterprise may choose not to allocate some item of revenue, expense, asset or liability for internal financial reporting purposes, even though a reasonable basis for doing so exists. Such an item is allocated pursuant to the definitions of segment revenue, segment expense, segment assets, and segment liabilities in this Standard.

Examples of segment assets include current assets that are used in the operating activities of the segment and tangible and intangible fixed assets. If a particular item of depreciation or amortisation is included in segment expense, the related asset is also included in segment assets. Segment assets do not include assets used for general enterprise or head-office purposes. Segment assets include operating assets shared by two or more segments if a reasonable basis for allocation exists. Segment assets include goodwill that is directly attributable to a segment or that can be allocated to a segment on a reasonable basis, and segment expense includes related amortisation of goodwill. If segment assets have been revalued subsequent to acquisition, then the measurement of segment assets reflects those revaluations.

16. Examples of segment liabilities include trade and other payables, accrued liabilities, customer advances, product warranty provisions, and other claims relating to the provision of goods and services. Segment liabilities do not include borrowings and other liabilities that are incurred for financing rather than operating purposes. The liabilities of segments whose operations are not primarily of a financial nature do not include borrowings and similar liabilities because segment result represents an operating, rather than a net-of-financing, profit or loss. Further, because debt is often issued at the head-office level on an enterprise-wide basis, it is often not possible to directly attribute, or reasonably allocate, the interest bearing liabilities to segments.

Segment revenue, segment expense, segment assets and segment liabilities are determined before intra-enterprise balances and intra-enterprise transactions are eliminated as part of the process of preparation of enterprise financial statements, except to the extent that such intra-enterprise balances and transactions are within a single segment.

While the accounting policies used in preparing and presenting the financial statements of the enterprise as a whole are also the fundamental segment accounting policies, segment accounting policies include, in addition, policies that relate specifically to segment reporting, such as identification of segments, method of pricing inter-segment transfers, and basis for allocating revenues and expenses to segments.

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Objective

The objective of this Standard 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. Such information helps users of financial statements:

(a) better understand the performance of the enterprise;

(b) better assess the risks and returns of the enterprise; and

(c) make more informed judgements about the enterprise as a whole.

Many enterprises provide groups of products and services or operate in geographical areas that are subject to differing rates of profitability, opportunities for growth, future prospects, and risks. Information about different types of products and services of an enterprise and its operations in different geographical areas - often called segment information - is relevant to assessing the risks and returns of a diversified or multi-locational enterprise but may not be determinable from the aggregated data. Therefore, reporting of segment information is widely regarded as necessary for meeting the needs of users of financial statements.

Scope

1. This Standard should be applied in presenting general purpose financial statements.

2. The requirements of this Standard are also applicable in case of consolidated financial statements.

3. An enterprise should comply with the requirements of this Standard fully and not selectively.

4. If a single financial report contains both consolidated financial statements and the separate financial statements of the parent, segment information need be presented only on the basis of the consolidated financial statements. In the context of reporting of segment information in consolidated financial statements, the references in this Standard to any financial statement items should construed to be the relevant item as appearing in the consolidated financial statements.

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Identifying Reportable Segments

Primary and Secondary Segment Reporting Formats

The dominant source and nature of risks and returns of an enterprise should govern whether its primary segment reporting format will be business segments or geographical segments. If the risks and returns of an enterprise are affected predominantly by differences in the products and services it produces, its primary format for reporting segment information should be business segments, with secondary information reported geographically. Similarly, if the risks and returns of the enterprise are by the fact that it operates in different countries or other geographical areas, its primary format for reporting segment information should be geographical segments, with secondary information reported for groups of related products and services.

Internal organization and management structure of an enterprise and its system of internal financial reporting to the board of directors and the chief executive officer should normally be the basis for identifying the predominant source and nature of risks and differing rates of return facing the enterprise and, therefore, for determining which reporting format isprimary and which is secondary, except as provided in sub-paragraphs (a) and (b) below:

(a) if risks and returns of an enterprise are strongly affected both by differences in the products and services it produces and by differences in the geographical areas in which it operates, as evidenced by a ‘matrix approach’ to managing the company and to reporting internally to the board of directors and the chief executive officer, then the enterprise should use business segments as its primary segment reporting format and geographical segments as its secondary reporting format; and

(b) if internal organizational and management structure of an enterprise and its system of internal financial reporting to the board of directors and the chief executive officer are based neither on individual products or services or groups of related products/ services nor on geographical areas, the directors and management of the enterprise should determine whether the risks and returns of the enterprise are related more to the products and services it produces or to the geographical areas in which it operates and should, accordingly, choose business segments or geographical segments as the primary segment reporting format of the enterprise, with the other as its secondary reporting format.

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For most enterprises, the predominant source of risks and returns determines how the enterprise is organised and managed. Organisational and management structure of an enterprise and its internal financial reporting system normally provide the best evidence of the predominant source of risks and returns of the enterprise for the purpose of its segment reporting. Therefore, except in rare circumstances, an enterprise will report segment information in its financial statements on the same basis as it reports internally to top management. Its predominant source of risks and returns becomes its primary segment reporting format. Its secondary source of risks and returns becomes its secondary segment reporting format.

A ‘matrix presentation’ — both business segments and geographical segments as primary segment reporting formats with full segment disclosures on each basis -- will often provide useful information if risks and returns of an enterprise are strongly affected both by differences in the products and services it produces and by differences in the geographical areas in which it operates. This Standard does not require, but does not prohibit, a ‘matrixpresentation’.

In some cases, organization and internal reporting of an enterprise may have developed along lines unrelated to both the types of products and services it produces, and the geographical areas in which it operates. In such cases, the internally reported segment data will not meet the objective of this Standard. Accordingly, paragraph 20(b) requires the directors and management of the enterprise to determine whether the risks and returns ofthe enterprise are more product/service driven or geographically driven and to accordingly choose business segments or geographical segments as the primary basis of segment reporting. The objective is to achieve a reasonable degree of comparability with other enterprises, enhance understandability of the resulting information, and meet the needs of investors, creditors, and others for information about product/service-related and geographically related risks and returns.

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Segment Accounting Policies

Segment information should be prepared in conformity with the accounting policies adopted for preparing and presenting the financial statements of the enterprise as a whole.

There is a presumption that the accounting policies that the directors and management of an enterprise have chosen to use in preparing the financial statements of the enterprise as a whole are those that the directors and management believe are the most appropriate for external reporting purposes. Since the purpose of segment information is to help users of financial statements better understand and make more informed judgments about the enterprise as a whole, this Statement requires the use, in preparing segment information, of the accounting policies adopted for preparing and presenting the financial statements of the enterprise as a whole. That does not mean, however, that the enterprise accounting policies are to be applied to reportable segments as if the segments were separate stand-alone reporting entities. A detailed calculation done in applying a particular accounting policy at the enterprise-wide level may be allocated to segments if there is a reasonable basis for doing so. Pension calculations, for example, often are done for an enterprise as a whole, but the enterprise-wide figures may be allocated to segments based on salary and demographic data for the segments.

This Statement does not prohibit the disclosure of additional segment information that is prepared on a basis other than the accounting policies adopted for the enterprise financial statements provided that

(a) the information is reported internally to the board of directors and the chief executive officer for purposes of making decisions about allocating resources to the segment and assessing its performance and

(b) the basis of measurement for this additional information is clearly described. Assets and liabilities that relate jointly to two or more segments should be allocated to segments if, and only if, their related revenues and expenses also are allocated to those segments.

The way in which asset, liability, revenue, and expense items are allocated to segments depends on such factors as the nature of those items, the activities conducted by the segment, and the relative autonomy of that segment. It is not possible or appropriate to specify a single basis of allocation that should be adopted by all enterprises; nor is it appropriate to force allocation of enterprise asset, liability, revenue, and expense items that relate jointly to two or more segments, if the only basis for making those allocations is arbitrary. At the same time, the definitions of segment revenue, segment expense, segment assets, and segment liabilities are interrelated, and the resulting allocations should be consistent. Therefore, jointly used assets and liabilities are allocated to segments if, and only if, their related revenues and expenses also are allocated to those segments. For example, an asset is included in segment assets if, and only if, the related depreciation or amortization is included in segment expense.

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Disclosure in Segment Reporting

Transparency is the cornerstone of corporate financial reporting. Analysts and other stakeholders need complete information to evaluate the sustainability and growth of a company and to monitor the performance of its management. Complete disclosure of information results in appropriate valuation of companies and thus improves the efficiency of the capital market.

Theoretically, the risk for investment in equity of a company that discloses complete information is lower than that of investment in equity of a company that withholds information. Greater disclosure should therefore bring down the cost of capital for a firm. No one, including managers, dispute this. Yet, in practice, managers often seek to limit transparency as much as they can without violating the letter of the law.

A case in point is the reporting of segment information. For long, accounting standards have sought to ensure that corporations that serve customers or have assets located in more than one country or carry out more than one business should report the financial performance of each separately.

Since the performance of each business is likely to be affected by quite distinct factors, such disaggregated information would allow users of financial statements to more reliably predict the future prospects of the firm. The US GAAP mandated disclosure of segment information for the first time in 1976. Subsequently the rules have been modified in 1997.The new rules require greater disclosure of disaggregated information. In India, the requirement for the disclosure of segment information came in force from accounting periods commencing on or after April 1, 2001, in respect of publicly traded companies and also in respect of all other commercial, industrial and business reporting entities whose turnover for the accounting period exceeds Rs 50 crore.

Accounting standards require companies to disclose segment revenue, segment expenses, segment results, segment assets and segment liabilities. In absence of a reasonable basis, common expenses and common assets and liabilities are not allocated to different segments. Accounting standards require companies to disclose information based on the internal management information system (MIS) that the CEO and the board of directors use to manage and oversee the strategy and operations of different segments. They do not require companies to redefine segments for external reporting. The objective is to allow investors to see the company through the eyes of the management. This also helps to predict management actions that can significantly affect future cash flows.

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Disclosure of segment information provides an insight into how business segments are creating or destroying value. It also helps to understand the strategy and risk exposure of the company. Companies are not required to provide information on all segments. A segment is a reportable segment if: its revenue from sales, including revenue from internal transfers, is 10 per cent or more of total revenue, external and internal, of all segments; its segment result, whether profit or loss, is 10 per cent or more of: the combined result of all segments in profit, or the combined result of all segments in loss, whichever is greater in absolute amount; or its segment assets are 10 per cent or more of the total assets of all segments. If total external revenue attributable to reportable segments constitutes less than 75 per cent of the total enterprise revenue, additional segments are identified as reportable segments, even if they do not meet the 10 per cent threshold tests, until at least 75 per cent of the total enterprise revenue is included in reportable segments.More often than not the efforts by regulatory bodies to ensure greater transparency through segment reporting have been thwarted by the actions of managers who have sought to evade accountability from stakeholders by limiting the amount of information provided in financial statements.

In their defense, managers argue that disclosure of proprietary information adversely affects the entity's competitive advantage and thus adversely affects the interest of shareholders. If this is true then companies that operate in a single business segment cannot create sustainable competitive advantage. We can pick up large number of successful companies that are operating in a single segment. Maruti, Tata Steel, ACC, DLF, Tata Tea, Bhatia Televenture and Hero Honda are some of the companies which have maintained leadership position in their respective industries for a long period.

We may examine the issue from another angle. Does a company that discloses segment information actually lose in the competition? Many will agree that in India, Infosys Technologies Limited discloses disaggregated information about different business and geographical segments in which it operates in accordance with the spirit of the accounting rules for segment reporting. But it has been able to maintain a leadership position for quite a long period. Therefore, the argument put forward by managers is not tenable. Research in the US reveals that adoption of new rules stipulated in SFAS-131 has not hurt the competitive position of companies. However, it has improved external monitoring. Thus, disclosure of disaggregated information on different segments in which the company operates threatens the manager's job if the resource allocation between different segments is suboptimal or if the company pursues poor diversification strategy.

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In fact, managers have strong incentives to aggregate segment information to avoid external scrutiny by the market for corporate control. They want to avoid accountability. However, in some situations it is just the mindset of managers. Take the example of Tata Motors. Tata Motors, which manufactures both commercial vehicles and passenger cars, does not treat the passenger car business separately from the commercial vehicles business for the purpose of segment reporting. Rather, it lumps them together into a single automobile business. The Centre for Monitoring Indian Industries' (CMIE) company database PROWSS considers passenger car manufacturing and commercial vehicles manufacturing as two separate sub-groups of the automobile industry. These two industries do not exhibit similar long-term financial performance. It is also difficult to assume that the board of directors and CEO carry on their function of overseeing the strategy and the operation of the company effectively by looking only at aggregated information for passenger cars and commercial vehicles.

Even if, for argument sake, we agree that it is debatable whether the two industries are different in terms of risk and return, perhaps Tata Motors would have done better to disclose the disaggregated information for the sake of investors and stakeholders who are interested to have the disaggregated information. The question of information overload does not arise because the company operates only in two business segments: manufacturing of passenger car and manufacturing of commercial vehicles. US GAAP indicates that the question of information overload begins when the number of segments goes beyond ten. It is hard to believe that managers of Tata Motors, which belongs to the highly respected Tata Group, are reluctant to submit their decisions to the scrutiny by the capital market.

In view of the managers' inherent reluctance to disclose information that strengthens external monitoring, the board of directors, particularly the audit committee of the board, should assume the responsibility of deciding what is to be disclosed and how much is to be disclosed. The board should strengthen the external monitoring by inducing managers to disclose all relevant information voluntarily and to implement accounting rules in spirit.This, in turn, will strengthen monitoring by the board of directors. The auditor has to play an important role in ensuring this. For example, the auditor is privy to the board records and the internal MIS and therefore she is in the best position to assess the adequacy or otherwise of the disclosure of segment information in external financial report. It would be really unfortunate if she instead uses her expertise to justify the inadequate disclosure by the company.

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CHAPTER 4: Advantages & Disadvantages of Segment Reporting

Advantages

Highlights performance of the various parts of an organization.

Enables users of financial statements to be better able to predict the future profitability of an organisation, particularly where segments are involved in diverse activities.

Disadvantages

Will lead to some costs being imposed on an organization

Management less likely to take business risks in particular segments if each segment’s results available.

Competitors will have access to information concerning segment profitability.

may also provide encouragement for further entrants into the industry.

Risk of takeover bids if losses made in particular segments and other parties consider that they can manage the particular segment more effectively.

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Chief Operating Decision MakerAs we now know, an operating segment is a component of an entity about which separate financial information is available and which is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The term ‘chief operating decision maker’ identifies a function, not necessarily a manager with a specific title. That function is to allocate resources to and assess the performance of the operating segments of an entity. Often the chief operating decision maker of an entity is its chief executive officer or chief operating officer but, for example, it may be a group of executive directors or others. The focus of the chief operating decision maker (whether an individual or a group of individuals) therefore dictates which components of an entity are deemed to be operating segments for the purposes of AASB 8.

Inter-Firm Comparability Allowing management to determine what components of their operation will

constitute ‘operating segments’ leads to concerns about comparing the results of operating segments of different organisations operating across similar industries.

However, the standard setters decided that the increased relevance of the information outweighs this concern pertaining to comparability.

Quantitative Thresholds for Disclosing Operating Segments

An entity shall report separately information about an operating segment that meets any of the following quantitative thresholds:

(a) Its reported revenue, including both sales to external customers and inter-segment sales or transfers, is 10 per cent or more of the combined revenue, internal and external, of all operating segments;

(b) the absolute amount of its reported profit or loss is 10 per cent or more of the greater, in absolute amount, of (i) the combined reported profit of all operating segments that did not report a loss and (ii) the combined reported loss of all operating segments that reported a loss;

(c) Its assets are 10 per cent or more of the combined assets of all operating segments.

Operating segments that do not meet any of the quantitative thresholds may be considered reportable, and separately disclosed, if management believes that information about the segment would be useful to users of the financial statements.

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CHAPTER 5: Application in Corporate Sector

Tata Group

Tata Group is an Indian Multinational Conglomerate Company headquartered in Mumbai, Maharashtra, India. It encompasses seven business sectors: communications and information technology, engineering, materials, services, energy, consumer products and chemicals. Tata Group was founded in 1868 by Jamsetji Tata as a trading company. It has operations in more than 80 countries across six continents. Tata Group has over 100 operating companies with each of them operating independently. Out of them 32 are publicly listed. The major Tata companies are Tata Steel, Tata Motors, Tata Consultancy Services (TCS), Tata Power, Tata Chemicals, Tata Global Beverages, Tata Teleservices, Titan Industries, Tata Communications and Taj Hotels. The combined market capitalization of all the 32 listed Tata companies was INR 8.4 Trillion ($141.27 billion) as of July 2014. Tata receives more than 58% of its revenue from outside India.

Products: Airline, Automotive, steel, IT, Electricity generation, Chemicals, Beverages, Telecom, Hospitality, Retail, Consumer goods, Engineering, Construction, Financial services.Founded: 1868.

Slogan: "Improving the quality of life of the communities we serve".

This section lists the Tata companies and details their business and products:

Chemicals

Tata Chemicals Rallis India Tata Pigments Limited General Chemical Industrial Products Brunner Mond Advinus Therapeutics Magadi Soda Company

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Consumer products

Tata Salt I-shakti Casa Décor Tata Swatch Tata Global Beverages Tata Tea Limited is the world's second largest manufacturer of packaged tea

and tea products. Tata Starbucks, is a 50:50 joint venture company, owned by Starbucks

Corporation and Tata Global Beverages Eight O’clock Coffee Tetley Tata Coffee Himalayan, Mount Everest Mineral Water’s natural mineral water brand Tata Ceramics Infiniti Retail (Croma) Tata Industries Titan Industries Trent (Westside) Landmark Bookstores Tata Sky Crossword Voltas, consumer electronics company Tata International Ltd. Tanishq Fastrack, Largest & Trendiest Youth Fashion Brand in India Titan Eye+, World class Optical Stores from Titan Industries Tata Refractory’s Westland

Energy

Tata Power is one of the largest private sector power companies. Tata Power Solar, a joint venture between Tata Power and BP Solar Hooghly Met Coke and Power Company Jamshedpur Utilities and Services Company Tata Power Delhi Distribution Ltd (Formerly Known as North Delhi Power

Ltd) Power links Transmission Tata Power Trading Tata Projects

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Engineering

TAL Manufacturing Solutions Tata AutoComp Systems Limited (TACO) Hispano Carrocera Tata Motors, manufacturer of commercial vehicles (largest in India) and

passenger cars Jaguar Land Rover (Manager of Tata's British brands Jaguar cars & Land

Rover) Tata Daewoo Commercial Vehicle Tata Projects Tata Technologies Limited Tata Marcopolo Tata Consulting Engineers Limited Tata Cummins Telco Construction Equipment TRF Voltas Global Engineering Centre Tata Advanced Materials Tata Advanced Systems Tata Motors European Technical Centre Tata Petrodyne Tata Precision Industries Telcon Construction Equipment

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Information systems and communication

Computational Research Laboratories

INCAT

Nelco

Nelito Systems

Tata Business Support Services

Tata Consultancy Services Ltd. (TCS) is one of the world's largest IT

Services companies.

Tata Elxsi

Neotel

Tata Interactive Systems

Tata Teleservices

Tata Teleservices (Maharashtra)

Virgin Mobile India

Tata Communications

CMC Limited

VSNL International Canada

Tatanet, Managed connectivity and VSAT service provider

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Services

Tata Sons

TajAir

AirAsia India

Air Asia India joint venture with Air Asia

The Indian Hotels Company

Taj Hotels

Vivanta By Taj

The Gateway Hotels & Resorts

Ginger Hotels

Roots Corporation

Tata Housing Development Company Ltd. (THDC)

Tata Limited

TATA AIG General Insurance

TATA AIA Life Insurance

e-Nxt Financials ltd.

TKM Global, Logistics and Supply Chain

Tata AG

Tata Asset Management

Tata Financial Services

Tata Capital Financial Services Limited

Tata International AG

Tata Investment Corporation

Tata Advanced Systems Limited

Drive India Enterprise Solutions

Mjunction services

Tata Quality Management Services

Tata Realty and Infrastructure Limited

Tata Interactive Systems

Tata Africa Holdings

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Tata AutoComp Systems

Tata Industrial Services

Tata NYK

Tata Services

Tata Strategic Management Group

Steel

Tata Steel

Tata Steel Europe

Tata Steel KZN

Tata Steel Processing and Distribution

JAMIPOL

NatSteel Holdings

Tata BlueScope Steel

Tata Metaliks

Tata Sponge Iron

Tayo Rolls

The Tinplate Company of India

Tata Bearings

TM International Logistics

Core sciences

Tata Institute of Fundamental Research

Tata Institute of Social Sciences

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Conclusion

I have studied and analyzed the whole project, “Accounting Standard 17: Its Application

In Corporate Sector”. From the study of the project I hereby conclude that the AS-17 the

“SEGMENT REPORTING” is been explained in detail. And its application in Corporate

Sector With reference to examples is been studied and put-on in the project.

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