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IAS 24 Related parties disclosure


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Objectives, related party definition, key management personnel etc.

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IAS 24 Related parties disclosure

  1. 1. PRIYA P.
  2. 2.  The objective of this Standard is to ensure that an entity’s financial statements contain the disclosures necessary to draw attention to the possibility that its financial position and profit & loss may have been affected by the existence of related parties.
  3. 3.  A related party is a person or entity that is related to the entity preparing the financial statements (reporting entity).  The related party directly or indirectly (a) Controls, is controlled by, or is under common control with, the entity (this includes parents, subsidiaries and fellow subsidiaries). (b) Has an interest in the entity that gives it significant influence over the entity (c) Has joint control over the entity.
  4. 4. The related party is: • An associate or joint venture of the entity • A member of key management of the entity or its parent • A close family member of an individual related to the entity. • An entity that is controlled, jointly controlled or significantly influenced by a member of key management. or a close family member of a related party. • A post-employment benefit plan for the benefit of the entity’s employees, or of any entity that is a related party of the entity.
  5. 5. FIG. Determining related parties •Parents •Subsidiaries •Joint ventures •Other entities controlled by owners or key management Significant influence Key management personnel Control
  6. 6.  It is a transfer of resources, services or obligations between a reporting entity and a related party, regardless of whether a price has been charged or not.  Examples:  purchases or sales;  rendering or receiving services;  leases;  transfer of research and development;  license agreements, finance arrangements, settlement of liabilities and provision of guarantees and collateral.
  7. 7.  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.
  8. 8.  the power to participate in the financial and operating policy decisions of an entity, but does not have control over those policies.  It may be gained by share ownership, statute or agreement.
  9. 9.  IAS 24 specifies that the following are not necessarily related parties: (a) Two entities simply because they have a director or key manager in common (b) Two venturers simply because they share joint control over a joint venture. (c) Providers of finance, trade unions, public utilities, and government bodies, simply by virtue of their normal dealings with the entity. (d) A customer, supplier, franchisor, distributor or general agent with whom an entity transacts a significant volume of business, merely by virtue of the resulting economic dependence
  10. 10.  Relationships between parents and its subsidiaries must be disclosed irrespective of whether there have been transactions between them or not.  An entity shall disclose the name of its parent or the ultimate controlling party.  If neither the entity’s parent nor the ultimate controlling party produces consolidated financial statements available for public use, the name of the next most senior parent that does so shall also be disclosed.
  11. 11. (a) Purchases or sales of finished or unfinished goods. (b) Purchases or sales of property or assets. (c) Rendering or receiving of services (d) Leases (e) Transfers of research and development (f) Transfers under finance arrangements (including loans and equity contributions in cash or in kind) (g) Provision of guarantees and collateral. (h) Management compensation (salaries, wages, compensations, pensions etc.)
  12. 12.  Parent  Entities with joint control/significant influence over the entity  Subsidiaries  Associates  Joint ventures  Key management personnel  Other related parties