Related Party Disclosures

IAS 24

Related Party Disclosures

IAS 24

Definition
  • A person or a close member of that person’s family is related to a reporting entity if that person:
    • has control or joint control over the reporting entity;
    • has significant influence over the reporting entity; or
    • is a member of the key management personnel of the reporting entity or of a parent of the reporting entity.
  • An entity is related to a reporting entity if any of the following conditions applies:
    • The entity and the reporting entity are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others).
    • One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group)
    • Both entities are joint ventures of the same third party (common venturer)
    • One entity is a joint venture of a third entity and the other entity is an associate of the third entity
    • The entity is controlled or jointly controlled by a person related to the reporting entity (see above)
    • A person who controls or joint controls the reporting entity has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity)
  • Close members of the family of a person include = children, spouse, and dependents
  • the following are not related parties:
    • two entities simply because they have a director or other member of key management personnel in common or because a member of key management personnel of one entity has significant influence over the other entity.
    • two venturer’s simply because they share joint control over a joint venture.
    • a customer, supplier, franchisor, distributor or general agent with whom an entity transacts a significant volume of business, simply by virtue of the resulting economic dependence.
  • Key management personnel have authority and responsibility for planning, directing and controlling the activities of the entity
Disclosures
  • Relationships between a parent and its subsidiaries shall be disclosed regardless of whether there have been transactions between them
  • An entity shall disclose key management personnel compensation in total and for each of the following categories:
    • short-term employee benefits;
    • post-employment benefits;
    • other long-term benefits;
    • termination benefits; and
    • share-based payment
  • if there are related party transactions, must disclose the following
    • nature of the related party relationship
    • amount of the transactions
    • the amount of outstanding balances and commitments
      • terms and conditions
      • guarantees given and received
    • provision for doubtful debt related to the outstanding balances from related parties
    • expense recognized in the period due to bad debt from related parties
Comparison to ASPE
  • Related party transactions are covered under ASPE 3840
  • Under IFRS, related party transactions are measured just like any other transaction; however, you need to disclose the details of the related party transaction
  • Under ASPE, there are measurement rules for related party transactions; at either the exchange amount or carrying value

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