CAclubindia News : Related Party disclosure under IFRS

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Related Party disclosure under IFRS

Current business scenario, the related party relationship are normal feature of any business, It may be through
subsidiaries, joint ventures and associates, these kind of business arrangements generally affect the business
transactions, financial & operating policies of the investee or investor entity through the presence of control,
join venture or significant influence. Ultimately this will affect the profit & loss a/c and financial position of
an entity. Due to this reason the disclosure of related party relationship, transactions, balances and
commitments are required to understand the financials statement by the stake holders.
Indian Accounting standard -18 deals with the related party transactions, however this article tries to unfold
the related party transactions aspects under IFRS
Under IFRS, IAS-24 deals with the related party disclosure, this standard guide us to identify the following
Related party relationships & transactions
Related party outstanding balance and commitments between the related party and reporting entity
Identify the circumstances in which disclosures required
Determining the disclosures to be made about transactions, balance and commitments
This standard applies for financial statements prepared as separate or consolidated whatever the form.

Who is the related party: This standard guides us to decide who is/are the related party/ies and their
relationships.

a person or close member of that person`s family is related to a reporting entity if that
person
a. Has control or joint control of the reporting entity
b. Has significant influence over the reporting entity or
c. Is a member of the key management personnel of the reporting entity or the parent of
the reporting entity

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Key management personnel are those having authority and responsibility for planning,
directing and controlling the activities of the entity, directly or indirectly, including any
Individual as
director (whether executive or otherwise) of that entity.
Related party

Entity will be treated as related party of the reporting entity if any of the following
conditions are applies
a. The entity and the reporting entity are the members of the same group, which means
that each parent, subsidiary and fellow subsidiary is related party to others.
b. One entity is an associate or joint venture of the other entity or an associate or joint
venture of the member of a group of which the entity is a member
c. The entity and reporting entry are the joint ventures of the same third party.
Entity
As
party

related

d. One entity is the joint venture of the third party and other entity is an associate of the
third party.
e. The entity is post-employment benefit plan for the benefit f the employees of either the
reporting entity or an entity related to the reporting entity. If the reporting entity itself
such a plan, the sponsoring employers are also related to the reporting entity.
f. The entity controlled or jointly controlled by a person identified as Individual as related
party as above
g. The entity identified or controlled over the significant influence by the person or the
key management personnel referred in Individual as related party as above.
h. The entity providing key management personnel service to the reporting entity.

What are all the related party transactions: The transactions are transfer of resources, services or
obligations between a reporting entity and related party, regardless of whether a price is charged.
Disclosure requirement: Under this standard the reporting entity required to disclose the following
a. Relationship between a parent and its subsidiaries shall be disclosed irrespective of whether there have
been transactions between them. An entity shall disclose the name of its parents and if different, 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 .
b. An entity shall disclose key management personnel compensation in total and for each of the following
Short term employee benefits
Post employment benefits
Other long term benefits
Termination benefits
Share based payments
If an entity obtains key management personnel services from a management entity , the entity is not required
to disclose the compensation details paid/payable to the management entity`s employees and director,

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however it can be disclosed as the provision of key management personnel services that are provided by the
separate management entity.
c. Transactions: If there have been transactions between related parties, then the reporting entity has to
disclose the following
Relationship of related party
The amount of the transactions
The amount of outstanding balances, including terms and conditions and guarantees
Provision for doubtful debts related to the amount of outstanding balances
Expenses recognised during the period in respect of bad or doubtful debts due from related parties
These above disclosures have to be made separately for each of the different categories like , parent, joint
control or significant influence, subsidiaries, associates, joint ventures ,key management personnel and other
related parties. In case the transactions are similar nature it can be disclosed in aggregate except when
separate disclosure is necessary for understanding the effects on financials.
Exemption in disclosure: The below categories of entity are exempted from the disclosure
a. A government that has control or joint control of , or significant influence over , the reporting entity and
b. Another entity that is a related party because of the same government has control or joint control of, or
significant influence over both the reporting entity and the other entity.
If the entity is exempted from the disclosure due to above circumstances then they need to disclose the
following details
The name of the Government
The nature of its relationship like control, joint control or significant influence

Source : -

25-Apr-16 12:09 PM