IAS 24

IAS 24 Related Party Disclosures

 

Overview: IAS 24 outlines number of disclosures for related party transactions so that financial statements contain the information that entity’s financial position and profit or loss may have been affected by the existence of related parties, transactions and outstanding balances with them.

 

Scope

IAS 24 shall be applied in:

• Identifying related party relationships and transactions;
• Identifying outstanding balances, including commitments, between an entity and its related parties;
• identifying the circumstances in which disclosure of the items above is required; and
• determining the disclosures to be made about those items.

 

IAS 24 requires disclosure of:

• Related party relationships
• Related party transactions
• Outstanding balances with related parties
• Commitments to related parties.

 

The disclosures have to be made in the related consolidated and separate financial statements of:

• A parent
• Investors with joint control of an investee
• Investor with significant influence over an investee.

 

DEFINITIONS

Key management personnel

Those persons having authority and responsibility for:

• Planning, directing, and controlling the activities of the entity, directly or indirectly, including all directors (executive and non-executive).

 

Close family member

Includes, but is not limited to:

• Children and Dependents
• Spouse/Partner
• Children and Dependents of Spouse/Partner.

 

Need to assess the level of influence on a case-by-case basis.

 

Related party transaction

Transfer of the following between related parties:

• Resources
• Services
• Obligations between related parties, whether a price is charged or not.

 

Government-related entity

Entity that is controlled, jointly controlled or significantly influenced by a ‘government’.

Government

Refers to government, government agencies and similar bodies whether local, national or international.

GOVERNMENT-RELATED ENTITIES

Government-related entities are exempt from the disclosure requirements of paragraph 18 in relation to related party transactions and outstanding balances, including commitments.

Refer to paragraphs 25 -27 of IAS 24 for specific details of the exemptions

 

DISCLOSURE

Relationships between parents and subsidiaries

• Regardless of whether there have been transactions, disclosure of the name of the parent or ultimate controlling party (if different) is required.

 

If parent or ultimate controlling party did not prepare consolidated financial statements for public use, the name of the next senior parent that does so needs to be disclosed as well.

Key management personnel compensation

Disclose in total for the following categories:

• Short-term employee benefits
• Post-employment benefits
• Other long-term benefits
• Termination benefits
• Share-based payments.

 

Management entities (Effective Date 1 July 2014):

• If an entity obtains key management personnel services from a management entity the requirements of IAS 24.17 to analyse compensation into short term, post-employment, other long term and termination benefits, and share-based payments, do not have to be applied to the compensation paid by the management entity to the management entity’s employees or directors.
• Instead, the entity has to disclose the amount incurred for the service fee paid to the management entity.

 

Related party transactions

Only if there have been transactions, disclose:

• The nature of related party relationship
• Information about transactions
• Information about outstanding balances to understand the potential effect on the Annual Financial Statements
• Information about impairment or bad debts with related parties.

 

Disclose related party transactions for each category of related parties.

The above disclosures shall be presented separately for each of the following categories:

• The parent
• Entities with joint control of, or significant influence over, the entity
• Subsidiaries
• Associates
• Joint ventures in which the entity is a joint venturer
• Key management personnel of the entity or its parent

Other related parties.