Ias 24 Flashcards
Related party transaction
Transfer of resources services or obligation between related parties, regardless of whatever price is charged
Related party
Person or entity related to the entity that is preparing its financial statements
A person or a close member of that persons family is related to a reporting entity if
That person
- Has control or joint control of the reporting entity
- Has significant influence over reporting entity
- Is a member of the key management personnel of the reporting entity or of a parent of the reporting entity
An entity is related to a reporting entity if any of the following conditions apply
- Entity and reporting entity are members of the same group
- One entity is associate or joint venture of the other entity
- Both entities are joint ventures of the same 3rd entity
- One entity is a joint venture of a 3rd entity and other entity is associate of the third entity
- The entity is a post employment benefit plan for the benefit of the employees Of the reporting entity or an entity related to the reporting entity. Also - sponsoring employers are related parties if the entity itself is such a plan.
- Entity is controlled or jointly controlled by a person ( related party)
- Person identified as related party as significant influence over the entity or is a member of the key management personnel of the entity or parent of the entity
- Entity or any member of a group of which it is a part, provides key management personnel services to the reporting entity or to the parent of the reporting entity
Following should not be considered related party
- 2 entities just because they have a director or other member of key management personnel in common
- 2 joint venturers just because they share joint control of a joint venture
- A customer or supplier with whom an entity transacts a significant volume of business
Substance over form concept should be applied
in ias 24 definition of Associate and joint ventures include
Their subsidiaries
Close member of family includes
- That persons children and spouse or domestic partner
- Children of that persons spouse or domestic partner
- Dependants of that person or that persons spouse or domestic partner
Key management personnel
Those with authority and responsibility for planning , directing and controlling the activities of the entity, including any director of that entity
Disclosure
Parent and subsidiary relationships
Relationship should be disclosed
Name of parent ( and ultimate controlling party should be disclosed)
( applies whether or not any transaction has taken place)
Disclosure
Key management personnel
Total compensation granted to key management personnel should be disclosed
It should be broken into following categories
- Short term benefits
- Pension benefits
- Termination benefits
- Share based payment schemes
Disclosure
Of transaction and balances
If there have been transactions between related parties and if there are balances outstanding between the parties , the following should be disclosed
- The nature of related party relationships
- A description of the transaction
- The amounts of the transaction
- The amount and detail of any outstanding balances
- Allowances for receivables in respect of outstanding balances
- The irrecoverable debt expense in respect of outstanding balances
( entity may only disclose that related party transaction were made on terms equivalent to those that prevail in arms length transactions if such terms can be substantiated)
Disclosure
Government related entities
- Details of the government and a description of its relationship with the reporting entity
- Details of individually significant transactions
- An indication of the extent of other transactions that are significant in aggregate
