Related Party Transactions

Question 1

Related Party transaction (RPT)

Answer 1

• economic transfer or resources/obligations between related parties (monetary and non-monetary)
• must be a related party before the transaction to be considered RPT

Question 2

RPT include

Answer 2

• any party which controls the entity where they can exert or exercises direct/indirect control, joint control or significant influence
• parties subject to common control, joint control or common significant influence
• management of the entity
• members of immediate family of an individual who is a related party

Question 3

2 ways to measure RPT (ASPE)

Answer 3

1) carrying amount (differences are charged to equity)
2) exchange amount (gains/loss recognized in NI)

Question 4

Carrying amount

Answer 4

• the BV of transferred item is recorded by the transferor
• difference between book value (carrying amount) and purchase price is charged to equity: gain = contributed surplus, loss = retained earnings

Question 5

Exchange amount

Answer 5

• consideration paid or received as agreed by the related parties (sales price)

Question 6

Normal course of operations

Answer 6

• transaction regularly undertaken by the enterprise with revenue generating purpose
• sale of PPE is never considered normal course of business, even if it is the normal business purposes (car sales)

Question 7

Substantive change in ownership

Answer 7

• when a transaction results in unrelated parties having acquired or given up at least 20% of the total equity ownership interests

Question 8

independent evidence

Answer 8

• independent appraisals and valuations
• comparable, quoted market prices
• comparable bias on the same transaction
• comparable amounts of similar transactions with unrelated parties

Question 9

Commercial substance exists when either…

Answer 9

• configuration of the future cash flows of the asset received differs from those given up
• the entity specific value of the asset received differs from the entity specific value of the asset given up

Question 10

RPT disclosures (ASPE)

Answer 10

• relationship
• transaction details
• amount
• measurement basis
• amounts/terms for receivables/payables
• contractual obligations
• contingencies

Question 11

IFRS Disclosures/differences

Answer 11

• IFRS RPT are no different than unrelated party transctions and therefore are measured at exchange amount
• disclosures are the same as ASPE plus:
• nature of RPT
• transactions undertaken
• key management compensation

Question 12

IFRS Disclosures/differences

Answer 12

• IFRS RPT are no different than unrelated party transactions and therefore are measured at exchange amount
• disclosures are the same as ASPE plus:
• nature of RPT
• transactions undertaken
• key management compensation

Question 13

ASPE decision tree for RPT

Answer 13

Please see notes for reference – just understand the tree