Identifying reportable segments

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 organisational 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.
21. 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

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AS 17
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.
22. 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 ‘matrix
presentation’.
23. In some cases, organisation 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 of
the 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.