About
The objective of IAS 24 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 or loss may have been affected by the existence of related parties and by transactions and outstanding balances, including commitments, with such parties.
A related party is a person or an entity that is related to the reporting entity:
- A person or a close member of that person’s family is related to a reporting entity if that person has control, joint control, or significant influence over the entity or is a member of its key management personnel.
- An entity is related to a reporting entity if, among other circumstances, it is a parent, subsidiary, fellow subsidiary, associate, or joint venture of the reporting entity, or it is controlled, jointly controlled, or significantly influenced or managed by a person who is a related party.
A related party transaction is a transfer of resources, services or obligations between a reporting entity and a related party, regardless of whether a price is charged. If an entity has had related party transactions during the periods covered by the financial statements, IAS 24 requires it to 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.
IAS 24 requires an entity to disclose key management personnel compensation in total and by category as defined in the Standard.
What you should know
- Know and apply the definitions of related parties and related party transactions.
- Identify related parties in practical situations.
- Identify transactions, outstanding balances and commitments with related parties.
- Disclose relationships between parent entities and subsidiaries.
- Disclose key management personnel compensation.
- Present and disclose related party transactions and balances in the financial statements.
- Explain the potential effect of related party relationships
- Explain the objective and scope of IAS 24
- Identify an entity’s related parties
- Identify relationships that do not give rise to a related party relationship as envisaged under IAS 24
- Describe and apply the disclosures required by IAS 24
- Explain why a government‐related entity has a partial exemption from related party disclosures