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Integral and non integral foreign operation

CA Naman Garg (Practicing CA) (86 Points)

17 October 2017

please tell me the difference between integral and non integral foreign operation.

and how to identify whether a company is adopting integral or non integral??

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7 Replies

satish (teaching) (2046 Points)
Replied 22 December 2017

best example for foreign operations is foreign branch.

when foreign branch works depending on Head office. i.e. branch selling the products which is supplied by HO. when no supply sale at branch will affect. in that case foreign branch activities are called integral foreign operations.

when foreign branch works independently. i.e. branch selling products head office as well as outside products also. branch has authority for decision making. in that case foreign branch activities are called non-integral foreign operations.

2 Like

ANJALI VIRAT (ACCOUNTANT BESIDES DOING CS WORK) (27 Points)
Replied 27 July 2018

it's perhaps, the trivial information but still imperative to know.

thanks for the info

it was best explained

1 Like

Prachi Bansal (3124 Points)
Replied 25 March 2021

Can someone explain to me integral and non-integral foreign operation with the help of examples

Avi Kapoor (4 Points)
Replied 11 September 2021

THE DIFF OF TRANSFER NIFO TO IFO IN BRANCH ACCOUNT

WHERE WE CAN USE OR IT IS SHOW IN B.S AS IT IS.

Avi Kapoor (4 Points)
Replied 11 September 2021

THE DIFF OF TRANSFER NIFO TO IFO IN BRANCH ACCOUNT

WHERE WE CAN USE OR IT IS SHOW IN B.S AS IT IS.

yasaswi gomes (My grammar is 💯 good I) (7290 Points)
Replied 12 September 2021

Classification of Foreign Operations as Integral or Non-integral - Tutorial (vskills.in)

a non-integral foreign operation accumulates cash and other monetary items, incurs expenses, generates income and perhaps arranges borrowings, all substantially in its local currency. Contrastingly, An integral foreign operation carries on its business as if it were an extension of the reporting enterprise’s operations. For example, such an operation might only sell goods imported from the reporting enterprise and remits the proceeds to the reporting enterprise.

It is complex, and if you look up at page 17 Decision tree here getdocument (mca.gov.in)

However, both integral and non integrals follow normal consolidation procedures of intragroup transaction based on the relationship. This standard AS-17 is no so cool because it doesn't define presentation or measurement. What's the use then??. Let me check Indas and find out the ease of it to understand

You will understand what to do. But this standard does not explain funding

yasaswi gomes (My grammar is 💯 good I) (7290 Points)
Replied 12 September 2021

Indas is also just the same when it comes to thresholds:

Revenue test: must be > 10% of combined revenue

Profit or loss test: must be > 10% of group profit or loss

Asset test: must be > 10% of combined segment assets

Lets discuss integral part:

Revenue will be same for both internal and external

Profit or Loss will be impacted due to interest on intragroup borrowings (In the consolidation, it will not impact as only external debt is considered, but will impact individual segment financial statements)

Assets will decrease due to supplying inventory, operating costs from bank.

Non Integral part: None of them will be impacted i guess because this segment is independent.

Well, we didn't learn much today and no revelations apart from which segment will prepare financial statements. But you also got a chance to understand both Integral & Non integral operations may or may not prepare financial statements based on the above criteria.