International Accounting Standard 24
Related Party Disclosures
In April 2001 the International Accounting Standards Board (IASB) adopted IAS 24 Related Party Disclosures, which had originally been issued by the International Accounting Standards Committee in July 1984.
In December 2003 the IASB issued a revised IAS 24 as part of its initial agenda of technical
projects that included amending disclosures on management compensation and related party disclosures in separate financial statements. The IASB revised IAS 24 again to address the disclosures in government-related entities.
In November 2009 the IASB issued a revised IAS 24 to simplify the definition of 'related
party' and to provide an exemption from the disclosure requirements for some government-related entities.
Other IFRSs have made minor consequential amendments to IAS 24. They include IFRS 10 Consolidated Financial Statements (issued May 2011), IFRS 11 Joint Arrangements (issued May 2011), IFRS 12 Disclosure of Interests in Other Entities (issued May 2011), IAS 19 Employee Benefits (issued June 2011), Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27) (issued October 2012) and Annual Improvements to IFRSs 2010-2012 Cycle (issued December 2013).
CONTENTS
INTRODUCTION
INTERNATIONAL ACCOUNTING STANDARD 24
RELATED PARTY DISCLOSURES
OBJECTIVE
SCOPE
PURPOSE OF RELATED PARTY DISCLOSURES
DEFINITIONS
DISCLOSURES
All entities
Government-related entities
EFFECTIVE DATE AND TRANSITION
WITHDRAWAL OF IAS 24 (2003)
APPENDIX
Amendment to IFRS 8 Operating Segments
FOR THE ACCOMPANYING DOCUMENTS LISTED BELOW, SEE PART B OF THIS
EDITION
APPROVAL BY THE BOARD OF IAS 24 ISSUED IN NOVEMBER 2009
BASIS FOR CONCLUSIONS
APPENDIX
Amendment to the Basis for Conclusions on IAS 19 Employee Benefits
DISSENTING OPINION
ILLUSTRATIVE EXAMPLES TABLE OF CONCORDANCE
International Accounting Standard 24 Related Party Disclosures (IAS 24) is set out in paragraphs 1-29 and the Appendix. All of the paragraphs have equal authority but retain the IASC format of the Standard when it was adopted by the IASB. IAS 24 should be read in the context of its objective and the Basis for Conclusions, the Preface to International Financial Reporting Standards and the Conceptual Framework for Financial Reporting. IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors provides a basis for selecting and applying accounting policies in the absence of explicit guidance.
The revised Standard was issued in November 2009. It supersedes IAS 24 (as revised in 2003). The text of the revised Standard, marked to show changes from the previous version, is available from the IASB's Subscriber Website at www.ifrs.org for a limited period.
Introduction
International Accounting Standard 24 Related Party Disclosures (IAS 24) requires a
reporting entity to disclose:
transactions with its related parties; and
relationships between parents and subsidiaries irrespective of whether
there have been transactions between those related parties.
The International Accounting Standards Board revised IAS 24 in 2009 by:
simplifying the definition of a related party, clarifying its intended
meaning and eliminating inconsistencies from the definition.
providing a partial exemption from the disclosure requirements for
government-related entities.
In making those revisions, the Board did not reconsider the fundamental
approach to related party disclosures contained in IAS 24 (as revised in 2003).
International Accounting Standard 24
Related Party Disclosures
Objective
Scope
The objective of this Standard 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.
This Standard shall be applied in:
identifying related party relationships and transactions;
identifying outstanding balances, including commitments,
between an entity and its related parties;
identifying the circumstances in which disclosure of the items in
(a) and (b) is required; and
determining the disclosures to be made about those items.
This Standard requires disclosure of related party relationships,
transactions and outstanding balances, including commitments, in the consolidated and separate financial statements of a parent or investors with joint control of, or significant influence over, an investee presented in accordance with IFRS 10 Consolidated Financial Statements or IAS 27 Separate Financial Statements. This Standard also applies to individual financial statements.
Related party transactions and outstanding balances with other entities in a
group are disclosed in an entity's financial statements. Intragroup related party transactions and outstanding balances are eliminated, except for those between an investment entity and its subsidiaries measured at fair value through profit or loss, in the preparation of consolidated financial statements of the group.
Purpose of related party disclosures
Related party relationships are a normal feature of commerce and business. For
example, entities frequently carry on parts of their activities through subsidiaries, joint ventures and associates. In those circumstances, the entity has the ability to affect the financial and operating policies of the investee through the presence of control, joint control or significant influence.
A related party relationship could have an effect on the profit or loss and
financial position of an entity. Related parties may enter into transactions that unrelated parties would not. For example, an entity that sells goods to its parent
at cost might not sell on those terms to another customer. Also, transactions between related parties may not be made at the same amounts as between unrelated parties.
The profit or loss and financial position of an entity may be affected by a related party relationship even if related party transactions do not occur. The mere existence of the relationship may be sufficient to affect the transactions of the entity with other parties. For example, a subsidiary may terminate relations with a trading partner on acquisition by the parent of a fellow subsidiary engaged in the same activity as the former trading partner. Alternatively, one party may refrain from acting because of the significant influence of another—for example, a subsidiary may be instructed by its parent not to engage in research and development.
For these reasons, knowledge of an entity's transactions, outstanding balances, including commitments, and relationships with related parties may affect assessments of its operations by users of financial statements, including assessments of the risks and opportunities facing the entity.
Definitions
The following terms are used in this Standard with the meanings
specified:
A related party is a person or entity that is related to the entity that is preparing its financial statements (in this Standard referred to as 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 or joint control of the reporting entity;
has significant influence over the reporting entity; or
is a member of the key management personnel of the
reporting entity or of a parent of the reporting entity.
An entity is related to a reporting entity if any of the following
conditions applies:
The entity and the reporting entity are members of the
same group (which means that each parent, subsidiary and fellow subsidiary is related to the others).
One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member).
Both entities are joint ventures of the same third party.
One entity is a joint venture of a third entity and the other entity is an associate of the third entity.
The entity is a post-employment benefit plan for the benefit
of employees of either the reporting entity or an entity related to the reporting entity. If the reporting entity is itself such a plan, the sponsoring employers are also related to the reporting entity.
The entity is controlled or jointly controlled by a person
identified in (a).
A person identified in (a)(i) has significant influence over
the entity or is a member of the key management personnel of the entity (or of a parent of the entity).
The entity, or any member of a group of which it is a part,
provides key management personnel services to the
reporting entity or to the parent of the reporting entity.
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.
Close members of the family of a person are those family members who may be expected to influence, or be influenced by, that person in their
dealings with the entity and include:
that person's children and spouse or domestic partner;
children of that person's spouse or domestic partner; and
dependants of that person or that person's spouse or domestic
partner.
Compensation includes all employee benefits (as defined in IAS 19 Employee Benefits) including employee benefits to which IFRS 2 Share-based Payment applies. Employee benefits are all forms of consideration paid, payable or provided by the entity, or on behalf of the entity, in exchange for services rendered to the entity. It also includes such consideration paid on behalf of a parent of the entity in respect of
the entity. Compensation includes:
short-term employee benefits, such as wages, salaries and social security contributions, paid annual leave and paid sick leave, profit-sharing and bonuses (if payable within twelve months of the end of the period) and non-monetary benefits (such as medical care, housing, cars and free or subsidised goods or services) for
current employees;
post-employment benefits such as pensions, other retirement
benefits, post-employment life insurance and post-employment
medical care;
other long-term employee benefits, including long-service leave or sabbatical leave, jubilee or other long-service benefits, long-term disability benefits and, if they are not payable wholly within twelve months after the end of the period, profit-sharing, bonuses and
deferred compensation;
termination benefits; and
share-based payment.
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director (whether executive or otherwise) of that entity.
Government refers to government, government agencies and similar bodies whether local, national or international.
A government-related entity is an entity that is controlled, jointly controlled or significantly influenced by a government.
The terms 'control' and 'investment entity', 'joint control' and 'significant influence' are defined in IFRS 10, IFRS 11 Joint Arrangements and IAS 28 Investments in Associates and Joint Ventures respectively and are used in this Standard with the meanings specified in those IFRSs.
In considering each possible related party relationship, attention is directed to
the substance of the relationship and not merely the legal form.
In the context of this Standard, the following are not related parties:
two entities simply because they have a director or other member of key management personnel in common or because a member of key management personnel of one entity has significant influence over the other entity.
two joint venturers simply because they share joint control of a joint
venture.
providers of finance,
trade unions,
public utilities, and
departments and agencies of a government that does not control,
jointly control or significant influence the reporting entity,
simply by virtue of their normal dealings with an entity (even though
they may affect the freedom of action of an entity or participate in its decision-making process).
a customer, supplier, franchisor, distributor or general agent with whom
an entity transacts a significant volume of business, simply by virtue of the resulting economic dependence.
In the definition of a related party, an associate includes subsidiaries of the
associate and a joint venture includes subsidiaries of the joint venture. Therefore, for example, an associate's subsidiary and the investor that has significant influence over the associate are related to each other.
All entities
Relationships between a parent and its subsidiaries shall be disclosed
irrespective of whether there have been transactions between them. An entity shall disclose the name of its parent and, if different, the ultimate controlling party. If neither the entity's parent nor the ultimate controlling party produces consolidated financial statements available for public use, the name of the next most senior parent that does so shall also be disclosed.
To enable users of financial statements to form a view about the effects of related party relationships on an entity, it is appropriate to disclose the related party relationship when control exists, irrespective of whether there have been transactions between the related parties.
The requirement to disclose related party relationships between a parent and its subsidiaries is in addition to the disclosure requirements in IAS 27 and IFRS 12 Disclosure of Interests in Other Entities.
Paragraph 13 refers to the next most senior parent. This is the first parent in the group above the immediate parent that produces consolidated financial statements available for public use.
An entity shall disclose key management personnel compensation in
total and for each of the following categories:
short-term employee benefits;
post-employment benefits;
other long-term benefits;
termination benefits; and
share-based payment.
If an entity obtains key management personnel services from another entity (the 'management entity'), the entity is not required to apply the requirements in paragraph 17 to the compensation paid or payable by the management entity to the management entity's employees or directors.
If an entity has had related party transactions during the periods covered by the financial statements, it shall 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. These disclosure requirements are in addition to those in
paragraph 17. At a minimum, disclosures shall include:
the amount of the transactions;
the amount of outstanding balances, including commitments,
and:
their terms and conditions, including whether they are
secured, and the nature of the consideration to be provided
in settlement; and
details of any guarantees given or received;