A party is said to be related to an entity if any of the following three situations occur:
The 3 situations are:
Controls / is controlled by entity
is under common control with entity
has significant influence over the entity
Types of related party
These therefore include:
Close family member of above (like my beautiful daughter pictured in her new school uniform aaahhh)
A post-employment benefit plan for the benefit of employees
Not necessarily related parties
Two entities with a director in common
Two joint venturers
Providers of finance
A big customer, supplier etc
Stakeholders need to know that all transactions are at arm´s length and if not then be fully aware.
Similarly they need to be aware of the volume of business with a related party, which though may be at arm´s length, should the related party connection break then the volume of business disappear also.
The name of the entity’s parent and, if different, the ultimate controlling party
The nature of the related party relationship
Information about the transactions and outstanding balances necessary for an understanding of the relationship on the financial statements
As a minimum, this includes:
Amount of outstanding balances
Bad and doubtful debt information
Key management personnel compensation should be broken down by:
short-term employee benefits
other long-term benefits
Group and Individual accounts
Disclose related party transactions / outstanding balances of parent, venturer or investor.
The intragroup transactions and balances would have been eliminated.