IAS 24 Related Parties

NotesVideoQuizObjective Test

A party is said to be related to an entity if any of the following three situations occur:

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.

NotesVideoQuizObjective Test