IAS 24

Related Party Disclosures

1Objective and scope

IAS 24 ensures an entity's financial statements 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 with them - relationships that are not always apparent from the transactions themselves.

2Key definitions

Related party

A person or entity related to the reporting entity, including: parties with control, joint control or significant influence over the entity (and vice versa); fellow subsidiaries; associates and joint ventures; key management personnel and their close family members; and entities controlled, jointly controlled or significantly influenced by key management personnel or their close family.

Key management personnel (KMP)

Persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director (executive or otherwise).

Close members of the family

Family members who may be expected to influence, or be influenced by, that person in their dealings with the entity - typically a spouse/domestic partner, children, and dependants.

3What must be disclosed

Relationships between a parent and its subsidiaries must be disclosed regardless of whether there were any transactions between them
Key management personnel compensation, disclosed in total and by category: short-term employee benefits, post-employment benefits, other long-term benefits, termination benefits, and share-based payment
For related party transactions: the nature of the relationship, the amount of the transactions, the amount of outstanding balances (with terms and conditions, whether secured, and the nature of consideration to be provided in settlement), and any allowance for doubtful debts and the related expense recognised on such balances

A government-related entity is granted a partial exemption from the full disclosure requirements for transactions with the government that controls, jointly controls or significantly influences it, and with other entities related through that same government - only more limited disclosures are required, given the impracticality of tracking every state-linked transaction.

4Presentation and disclosure

The disclosures above ARE the standard - there is no separate recognition or measurement guidance in IAS 24 beyond identifying who is a related party and disclosing the relationship and transactions.

5Examinable focus

What KASNEB tests

Identifying every related party from a scenario describing an entity's group structure, directors and their family interests (a classic KASNEB written question), and listing the five categories of key management personnel compensation that must be disclosed by category.