Related Party Disclosures

• Related parties are considered to be related if one party has;

  • The ability to control the other party
  • The ability to exercise significant influence over the party
  • Joint control over the reporting entity
• Control is ownership directly or indirectly through subsidiaries or more than half of the voting power of an entity.


  Significant influence may be gained by share ownership of 20% or more.
• Joint control is contractually agreed sharing of control over economic activity.
• Affiliates means that parent, subsidiaries, and fellow subsidiaries.


  If an investor owns more than 50% of an investee, the investor is known as the parent, and the investee is known as a subsidiary.
• Associates means the entities over which one party exercises significant influence.


  If an investor owns at least 20% of the investee, the investee is known as the subsidiary.
• Venturers are related to the joint venture because they have joint control of the activities of the joint venture.
• The key management personnel are the persons with managerial positions, like the president, vice president, chief executive officer, and other officers with responsibility of controlling the activities of the entity.
• A related party transactions is a transfer of resources or obligations between related parties, regardless of whether a price is charged.
• PAS 24, Paragraph 12 requires disclosure of related party relationships where control exists irrespective of whether there have been transactions between related parties.


  In other words, relationships between parent and subsidiaries or investor and associates shall be disclosed regardless of whether there have been transactions between those related parties.
• PAS 24, Paragraph 17 provides that if there have been transactions between related parties, an entity shall disclose the nature of the related party relationships as well as information about the transactions and outstanding balances necessary for understanding of the financial statements,
• PAS 24, Paragraph 16 provides that an entity shall disclose key management personnel compensation in total.
• PAS 24, Paragraph 3 requires disclosure of related party transactions and outstanding balances in the separate financial statements of a parent, subsidiary, associate, or venturer.


  However, PAS 24, Paragraph 4 provides that intragroup related party transactions and outstanding balances are eliminated in the preparation of the consolidated financial statements of the group.