Boilinggaap - IAS 24 revised

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from NO MORE THAN 8 SLIDES Series of boilinggaap.org a brief illustration of IAS 24 revised in November 2009

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Boilinggaap - IAS 24 revised

  1. 1. www.boilinggaap.org “NO MORE THAN 8 SLIDES” Series IAS 24 revised – Related Party Disclosures (November 2009)
  2. 2. “NO MORE THAN 8 SLIDES” Series – http://www.boilinggaap.org IAS 24 Revised – Related Party Disclosures Briefly ► In November 2009, IASB issued a revised version of IAS 24 – Related Party Disclosures (“IAS 24- R”); ► IAS 24-R aims to ensure financial reporting on the possibility that the financial position of an entity and its economic performance could have been affected by the existence of related parties and transactions, balances, and commitments with such parties; ► The main changes are: ► inclusion of “commitments” with related parties among transaction to be disclosed; ► disclosure is now required not only for separate financial statements but also for consolidated and individual financial statements (*); ► the definition of “related party” has been amended and simplified; ► a simplified disclosure dedicated to “government-related entities” ► IAS 24-R will be effective from period beginning on or after January 1, 2011; retrospective application is required. (*) In some jurisdictions such disclosure for consolidated financial statement has already been required by Market Regulator regulations (e.g., in Italy by CONSOB DEM. 6064293 del 28/7/2006) TALKING ON ACCOUNTING POLICIES 2
  3. 3. “NO MORE THAN 8 SLIDES” Series – http://www.boilinggaap.org IAS 24 Revised – Related Party Disclosures Commitments with related parties ► IAS 24-R in the disclosure on transactions with related parties includes also the "commitments" with those parties (para. 18) ; ► IAS 24-R (par. 21.(i)), in its examples of transactions with related parties, includes: ► “commitments to do something if a particular event occurs or does not occur in the future, including executory contracts (recognised and unrecognised) (*). (*) IAS 37 Provisions, Contingent Liabilities and Contingent Assets defines executory contracts as contracts under which neither party has performed any of its obligations or both parties have partially performed their obligations to an equal extent. TALKING ON ACCOUNTING POLICIES 3
  4. 4. “NO MORE THAN 8 SLIDES” Series – http://www.boilinggaap.org IAS 24 Revised – Related Party Disclosures Existence of the “related party relationship” “If an entity has had related party transactions during the periods covered by the financial statements, it shall disclose the nature of the related party relationship as well as information about those transactions and outstanding balances, including commitments, necessary for users to understand the potential effect of the relationship on the financial statements”. It entails that It entails that The disclosure is required even if the related party relation is not alive at the financial statement date. TALKING ON ACCOUNTING POLICIES 4
  5. 5. “NO MORE THAN 8 SLIDES” Series – http://www.boilinggaap.org IAS 24 Revised – Related Party Disclosures Key changes in definition of related party ► Case: entity “A” controls entity “B” (subsidiary) and has a significant influence over entity “C” (associate): ►both A and its subsidiary B are related parties of C (currently in IAS 24); and ►both A and its associate C are related parties of B (change in IAS 24R). ► Case: a person has a significant influence over two entities (associates): ►the two associates are not related due to insufficient influence (change in IAS 24R, currently IAS 24 has addressed the case of an entity invests in two associates). ► Case: a key manager of entity “A” controls or jointly controls entity “B”: ►entity B is related party of entity A (currently in IAS 24); and ►from the standpoint of entity B, entity A is treated as its related party (change in IAS 24R). ► Case: a person controls or jointly controls entity “A” (“reporting entity”), and a closed member of that person’s has a joint control or significant influence over entity “B”: ►entity B is related party of entity A (currently in IAS 24); e ►from the standpoint of entity B, entity A is treated as related party (change in IAS 24R). ► Case: a person or a third party has a joint control or a significant influence over entities A and B: ►the two entities are reciprocally related parties (change in IAS 24R). TALKING ON ACCOUNTING POLICIES 5
  6. 6. “NO MORE THAN 8 SLIDES” Series – http://www.boilinggaap.org IAS 24 Revised – Related Party Disclosures Related party – Person (par. 9 (a)) A person is a related party of the reporting entity if: Person or a close member of that person’s family (1) •has a control, or •has a control, or •Is a KEY MANAGER (2) of the •Is a KEY MANAGER (2) of the •joint control, or •joint control, or RE or of a parent of the RE RE or of a parent of the RE •has significant influence over •has significant influence over the RE the RE Reporting Entity (RE) Reporting Entity (RE) (1) Close members of the family of a person include: i) that person’s children and spouse or domestic partner; ii) children of that person’s spouse or domestic partner; and iii) dependants of that person or that person’s spouse or domestic partner. (2) Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director (whether executive or otherwise) of that entity TALKING ON ACCOUNTING POLICIES 6
  7. 7. “NO MORE THAN 8 SLIDES” Series – http://www.boilinggaap.org IAS 24 Revised – Related Party Disclosures Related party – Entity (par. 9 (b)) (1/2) The following entities are related party of the Reporting Entity Members of the same Members of the same Group of RE Group of RE Par. 9 (b) (i) Par. 9 (b) (i) Associate or Joint Venture of Associate or Joint Venture of RE or of a member of a group RE or of a member of a group of which RE is a member of which RE is a member Par. 9 (b) (ii) Par. 9 (b) (ii) Reporting Entity (RE) Reporting Entity (RE) Pension fund for the Pension fund for the employees of either the RE or employees of either the RE or an entity related to the RE an entity related to the RE Par. 9 (b) (v) Par. 9 (b) (v) Entities correlated to a person Entities correlated to a person that is in turn correlated to RE that is in turn correlated to RE Par. 9 (b) (vi) e (vii) Par. 9 (b) (vi) e (vii) Related party TALKING ON ACCOUNTING POLICIES 7
  8. 8. “NO MORE THAN 8 SLIDES” Series – http://www.boilinggaap.org IAS 24 Revised – Related Party Disclosures Related party – Entity (par. 9 (b)) (2/2) The following entities are related party of the entity: Par. 9 (b) (iii) e (iv) Third party Third party Par. 9 (b) (iii) e (iv) Reporting Entity (RE) Reporting Entity (RE) Joint Venture or associate of Joint Venture or associate of RE is a Joint Venture of RE is a Joint Venture of the Third party the Third party the Third party the Third party Par. 9 (b) (iv) Par. 9 (b) (iv) Third party Third party Reporting Entity (RE) Reporting Entity (RE) Joint Venture of the Third Joint Venture of the Third RE is an associateof the RE is an associateof the party party Third party Third party Related party TALKING ON ACCOUNTING POLICIES 8
  9. 9. “NO MORE THAN 8 SLIDES” Series – http://www.boilinggaap.org IAS 24 Revised – Related Party Disclosures Disclaimer This publication has been prepared solely for the website http://www.Boilinggaap.org and is provided for general information purposes only. This publication is available under the Creative Commons Attribution/Share-Alike License. You must not, in any circumstances, use or reproduce the Boilinggaap logo without prior consent. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, Boilinggaap accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. TALKING ON ACCOUNTING POLICIES 9

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