Project Guidelines

(Issued by CBSE)

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Project Guidelines
Background:
Project Work is expected to help the students in
developing skills to
(i) comprehend,
(ii) Analyse, and
(iii) interpret
accounting data of business firms and make it
meaningful for taking business decisions.

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Project Guidelines
Objectives:
 To enable students to complete the accounting
process in real life business situations and apply
the tools of analysis as per the syllabus for a
Comprehensive Project.
 To develop the competence of reading accounting
data from quarterly or half yearly or annual
reports of business firms and interpreting the
information on the basis of given guidelines to
present the desireable information in required
format in the Project File for Specific Projects.

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Project Guidelines
Project Making:
Students to work on at least three types of projects,
out of which one shall be of Comprehensive nature.
Comprehensive Project:
It should involve students from initial stage of
accounting to preparation and analysis of financial
statements. The data used should be close to real
life situations, as far as possible.
It should cover all important aspects like
investments, financing, operating, adjustments to
final accounts, etc. in a condensed form.

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Specific Projects:
Two projects of specific nature to be made using at
least one tool of analysis in each.
The data to be used will be drawn mainly from
quarterly or half yearly or annual reports of corporate
sector.
Students to analyse the information given in the
financial information as follows:
(a) Performance of segment keeping in mind their
parameters Revenue, Net Profit and Capital
Employed; and
(b) Comparison of Revenue, Net Profit and EPS
with the help of Comparative or Common Size
Statements

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 Tools to be used:
(i) Comparative Statement;
(ii) Common size Statement;
(iii) Ratios; and
(iv) Cash Flow Statement.

Note:
The tools of analysis are to be used in
(a) development of the project; and
(b) for reaching the conclusion

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Questions in Project Guidelines
Questions given in Project Guidelines
are only illustrative. Examiners are free to frame
their own questions but they should ensure that
these questions so framed are not similar to the
questions that may come in the Board Examination.

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VIVA VOCE
Examiner is expected to ask 2 – 3 questions from
the project to ensure that the student has
prepared the project.

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 Project
On
Segment Reporting

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SEGMENT REPORTING
What is meant by Segment and Why is it
disclosed in the Financial Statements?
Answer:
Segment is a distinguishable component of an
enterprise based on the products or services (called
Business Segment) or based on location (called
Geographical Segment).
Accounting Standards, as notified under section 133
of the Companies Act, 2013 are mandatory on the
companies.
AS 17, Segment Reporting requires companies,
where applicable, to disclose segment results for
better understanding of the financial statements and
taking decisions by the users.
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SEGMENT REPORTING
What is Business Segment?

Answer:
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 risks and
returns that are different from those of other business
segments.

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SEGMENT REPORTING
What is Geographical Segment?

Answer:
Geographical Segment is a distinguishable
component of an enterprise that is engaged in
providing an products or services within a particular
economic environment and that is subject risks and
returns that are different from those of components
operating in other economic environment.

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SEGMENT REPORTING
What is Reportable Segment?

Answer:
Reportable Segment is a business segment or a
geographical segment identified on the basis of
definitions (given earlier) for which segment
information is required to be disclosed.

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SEGMENT REPORTING
What is Enterprise Revenue?
Answer:
Segment revenue is revenue from sales to external
customers as reported in the Statement of Profit and
Loss.

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SEGMENT REPORTING
What is Segment Revenue?
Answer:
Segment revenue is an aggregate of
(i) the portion of enterprises 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.

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SEGMENT REVENUE
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 financial nature; and
(c) Gains on sale of investments or on extinguishment
of debt unless the operations of the segment are
primarily of financial nature.

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SEGMENT REPORTING
What is Segment Expense?
Answer:
Segment expense is an aggregate of
(i) the expenses resulting from the operating activities
of a segment that is directly attributable to a
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.

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

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SEGMENT REPORTING
What is Segment Result?
Answer:
Segment result is
Segment Revenue – Segment Expense.

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SEGMENT REPORTING
What are Segment Assets?
Answer:
Segment assets are
Operating assets that are employed by the
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.
Segment assets includes goodwill directly
attributable to a segment or allocated on a
reasonable basis.

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SEGMENT REPORTING
What are Segment Liabilities?
Answer:
Segment liabilities are
Operating liabilities are those operating liabilities
that result from the operating activities of the
segment and that are directly attributable to the
segment or can be allocated to the segment on a
reasonable basis.

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Diagrammatic Representation
SEGMENT REPORTING
Reporting based on multiple products / services
and
operations in different geographical locations

Business Distinguishable Geographical

Segment Component Segment

Segment based on
Segment based on
operations in different
“Products or Services”
“geographical areas”
or related products that
that are prone to
are prone to different
different risks and
risks and returns
returns

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 Illustrative Project on
Segment Reporting

ITC Ltd.

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Project Background
Following segmental financial data is taken from the
newspaper dated ……… as published in the
Economic Times, which the company ITC Ltd.
published to meet the listing requirements of
Securities and Exchange Board of India (SEBI).
The results are for two quarters ended 31st March,
2015, 31st March, 2014 and the year ended 31st
March, 2015.
The Segment Report has been compared and
analysed using different components for the
purpose and using ratios as the tool for analysis.
The analysis has been presented by Pie-diagrams
and Bar Charts.
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SEGMENT-WISE REVENUE Quarter and Twelve
Months ended 31st March, 2015
Year ended
Quarter Quarter 31st
ended 31st ended 31st March,
Particulars March, 2015 March, 2014 2015
FMCG—Cigarettes 4,21,070 4,07,878 17,76,599
FMCG—Others 2,56,651 2,31,451 9,02,723
Hotels 34,642 32,051 1,25,616
Agri Business 1,42,789 2,00,424 8,38,047
Paperboards, Paper
and Packaging 1,20,258 1,26,120 4,97,390
Others 0 0 1,74,802
Total 9,75,410 9,97,924 43,15,177
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 Revenue for Quarter ended 31st March, 2015

FMCG—Cigarettes
Rs. 1,20,258
12.33%
FMCG—Others

Rs. 1,42,789 Rs. 4,21,070

14.63% Hotels
43.17%

Agri Business
Rs. 2,56,651
26.32%
Rs. 34,642 Paperboards,
3.55% Paper and
Packaging
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 Revenue for Quarter ended 31st March, 2014
0
FMCG—Cigarettes
Rs. 1,26,120
12.63%
FMCG—Others

Rs. 4,07,878
Rs. 2,00,424 40.87% Hotels
20.08%

Agri Business

Rs. 2,31,451
Paperboards,
23.19%
Rs. 32,051 Paper
Othersand
3.20% Packaging
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 Rs. Revenue for Year ended 31st March, 2015
1,74,802 –
FMCG—Cigarettes
4.05%
Rs.
FMCG—Others
4,97,390
11.53%
Hotels
Rs. 17,76,599
Rs 8,38,047 41.17% Agri Business
19.42%

Paperboards,
Paper and
Rs. 9,02,723 Packaging
Rs 1,25,616 20.92% Others
2.91%

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VIVA QUESTIONS
Q1. What is Segment Reporting?
Ans. Segment Reporting is the reporting of the
operating segments of a company as a
disclosure in the Notes to Accounts attached to
financial statements.
Segment reporting is made with a purpose to
give information to investors and creditors
regarding the financial results and position of
the operating segments of a company, which
they can use as the basis for decision making.
AS 17, Segment Reporting is mandatory
accounting standard for companies as provided
in section 133 of the Companies Act, 2013.
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VIVA QUESTIONS
Q2. Name the various segments of ITC Limited.
Ans. Various segments of ITC Limited are:
1. FMCG (Fast Moving Consumer Goods)—
Cigarettes and Others,
2. Hotels,
3. Agri Business,
4. Paper boards, Paper and Packaging, and
5. Others.

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VIVA QUESTIONS
Q3. Which segment is the most profitable segment
of the Company?
Ans. FMCG—Cigarettes and Others is the best
segment, because it contributes around 81%
to the profit of the company.

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VIVA QUESTIONS
Q4. Which segment has the highest revenue?
Ans. FMCG—Cigarettes segment has highest
revenue, it has about 48% revenue to the
total net revenue from operations of the
company.

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VIVA QUESTIONS
Q5. Can you state the risks carried by FMCG—
Cigarettes segment?
Ans. It carries the risk of high imposition of tax due
to Government policies. It is evident from the
fact that tobacco is placed in the highest
bracket i.e., 28% under the Goods and
Services Tax (GST);
Increasing public opinion against use of
tobacco; and
Possible Court interference banning sale of
tobacco to say persons below 25 years of
age.
It will have adverse effect on the company’s
profit.
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VIVA QUESTIONS
Q6. Should the company operate in only FMCG—
Cigarettes segment due to high profits?
Ans. In my opinion, the company should make more
efforts to promote business of other segments
such as that of Paper and Paper Boards, Agri
Business etc.
With the education level and businesses
increasing, paper, in all probability, will have high
demand and therefore, more business is
expected. Similarly, Agri Business will grow at
better pace because a large population pays
more attention to hygiene. Once Foreign Direct
Investment is allowed in Retail Sector, this
business will grow at even better pace.
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