Objective
Ensures financial statements draw attention to the possibility that results and position have been affected by related parties and by transactions and balances with them.
Scope
- Identifying related party relationships and transactions, outstanding balances (including commitments), and the disclosures required.
- Applies to consolidated, separate and individual financial statements; intragroup transactions are eliminated on consolidation.
Key definitions
- Related party (person)
- A person, or close member of that person's family, who has control, joint control or significant influence over the entity, or is a member of key management personnel of the entity or its parent.
- Related party (entity)
- Includes members of the same group, associates and joint ventures (of the entity or of a group member), post-employment benefit plans for employees, entities controlled or jointly controlled by a related person, and entities providing key management services.
- Key management personnel (KMP)
- People with authority and responsibility for planning, directing and controlling the entity's activities, directly or indirectly, including directors.
- Close family members
- Family members who may be expected to influence, or be influenced by, the person in dealings with the entity — for example a spouse or domestic partner, children and dependants.
Recognition & measurement
Identification
- Look at the substance of the relationship, not just its legal form.
- Not related simply because: two entities share a director or other KMP; two venturers share joint control of a joint venture; they are providers of finance, trade unions, utilities or government departments in normal dealings; or a single customer or supplier is economically dependent on the entity.
- A government-related entity has a partial exemption from detailed disclosure of transactions with the government and other entities related to the same government.
Key disclosures
- Parent–subsidiary relationships, whether or not there were transactions, including the name of the parent and ultimate controlling party.
- KMP compensation in total and by category: short-term, post-employment, other long-term, termination and share-based payment.
- For transactions: nature of the relationship, amounts, outstanding balances and terms, allowances for doubtful debts and related expense.
- Saying related-party transactions were on arm's length terms is only allowed if that can be substantiated.
Common exam traps
- Transactions must be disclosed even if no price was charged.
- A shared director alone does not make two entities related.
- The parent relationship must be disclosed even with no transactions.
Practise MCQs on this standard
Test your understanding of IAS 24 with free chapter-wise MCQs and explanations in these question banks.
CAF-1 Financial Accounting and ReportingICAP CAFACCA FA Financial AccountingACCAACCA FR Financial ReportingACCACAF-6 Corporate ReportingICAP CAFCIMA BA3 Fundamentals of Financial AccountingCIMA Certificate in Business AccountingICAEW AF Accounting FundamentalsICAEW ACA Certificate LevelCA Inter P1 Advanced AccountingICAI CA Intermediate
ICAI CA Intermediate examines Indian Accounting Standards, which are based on but can differ from IFRS. Check your syllabus.