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Under IAS 24, disclosures are required in respect of an entity’s transactions with related parties. Related parties include:
- Fellow subsidiaries.
- Associates of the entity and other members of the group.
- Joint ventures of the entity and other members of the group.
- Members of key management personnel of the entity or of a parent of the entity (and close members of their families).
- Persons with control, joint control or significant influence over the entity (and close members of their families).
- Post-employment benefit plans.
- Entities (or any of their group members) providing key management personnel services to the entity or its parent.
Finance providers are not related parties simply because of their normal dealings with the entity.
Management discloses the name of the entity’s parent and, if different, the ultimate controlling party (which could be a person). Relationships between a parent and its subsidiaries are disclosed irrespective of whether there have been transactions with them.
Where there have been related party transactions during the period, management discloses the nature of the relationship, as well as information about the transactions and outstanding balances, including commitments, necessary for users to understand the potential impact of the relationship on the financial statements. Disclosure is made by category of related party and by major type of transaction. Items of a similar nature may be disclosed in aggregate, except when separate disclosure is necessary for an understanding of the effects of related party transactions on the entity’s financial statements.
Management only discloses that related party transactions were made on terms equivalent to those that prevail in arm’s length transactions if such terms can be substantiated.
An entity is exempt from the disclosure of transactions (and outstanding balances) with a related party that is either a government that has control, joint control or significant influence over the entity or is another entity that is under the control, joint control or significant influence of the same government as the entity. Where the entity applies the exemption, it discloses the name of the government and the nature of its relationship with the entity. It also discloses the nature and amount of each individually significant transaction and the qualitative or quantitative extent of any collectively significant transactions.