IAS 24 – Related Party Disclosures
Objective: To ensure that financial statements draw the results of operations may have been affected by existence of related parties.
Related parties are:
1) Parties that control.
2) Parties that have significant influence on the reporting entity.
3) Parent companies (A - 50% or more ->B) and subsidiaries.
4) Joint ventures (A – 40% - B and C – 40% in B + an agreement for control)
5) Owners and their families.
6) Key management personnel.
7) Post employment benefit plans.
Requires Disclosure of:
1) Related party transaction.
2) Management compensation.
Example of related party transaction that must disclosed:
- Purchas or sale of goods
- Purchas or sale of assets
- Rendering or receiving of service
- Leases
- Transfers of research and development.
- Transfers under license agreements
- Transfer under finance agreements, including loans and equity contribution.
- Provision of guarantees or collateral.
- Settlement of liabilities on behalf of the entity or on behalf of another party.
The Differences and Similarities between US GAAP Law and IFRS
Similarities & Differences:
IFRS | US Law GAAP | |
Related party relationships are those involving control direct or indirect, on joint control or significant influence. | Like IFRS related party relationships are those involving control direct or indirect, on joint control or significant influence. | Related party |
Key management and their close family member are related parties. | Like IFRS key management and their immediate family member are related parties. | Key management and their |
There is no special recognition or measurement requirement for related party transactions. | Like IFRS there is no special recognition or measurement requirement for related party transactions. | Requirement for measurement to related party transaction |
No disclosure is required in the consolidated financial statement of intra-group transaction eliminated in preparing those statements. | Like IFRS no disclosure is required in the consolidated financial statement of intra-group transaction eliminated in preparing those statements. | Related party transaction in consolidated financial statement |
Comprehensive disclosures of related party transaction are required for each category of related party relationship. There is requirement for the disclosures to be grouped into categories of related parties | Like IFRS Comprehensive disclosures of related party transaction are required for each category of related party relationship. Unlike IFRS there is no requirement for the disclosures to be grouped into categories of related parties | Comprehensive disclosures |
Key management personal compensation is disclosed in total and is analyzed by component. | Unlike IFRS management compensation is not required to be disclosed in the financial statement. | Management Compensation |
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