ACCA SBR ^INT Syllabus C. Reporting The Financial Performance Of A Range Of Entities - Related Parties - Notes ^{4 / 4}

The 3 situations are:

1. Controls / is controlled by entity

2. is under common control with entity

3. has significant influence over the entity

Types of related party

These therefore include:

1. Subsidiaries

2. Associate

3. Joint venture

4. Key management

5. Close family member of above (like my beautiful daughter pictured in her new school uniform aaahhh)

6. 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.

Disclosures

• General

  • 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

  • post-employment benefits

  • other long-term benefits

  • termination benefits

  • share-based payment

Group and Individual accounts

1. Individual accounts

   Disclose related party transactions / outstanding balances of parent, venturer or investor.

2. Group accounts

   The intragroup transactions and balances would have been eliminated.