IASB re-exposes proposed related party standard
11 Dec 2008
The IASB has published a revised exposure draft (2008 ED) proposing to amend IAS 24 'Related Party Disclosures' with respect to 'relationships with the state'. The purpose of the revised ED is to simplify the disclosure requirements that apply to state-controlled entities under the existing IAS 24.
Prior to a revision of IAS 24 in 2003, state-controlled entities were exempted from the related party disclosures. That exemption was removed in the 2003 revision, which took effect in 2005 and continues in force today. Therefore, currently, profit-oriented state-controlled entities that use IFRSs must disclose transactions with other state-controlled entities. In those jurisdictions, such as China, where state-controlled entities are a major segment of the economy, the volume of disclosures under the requirements of the current IAS 24 has become burdensome and unwieldy, impairing understandability and usefulness of the financial statements.
In February 2007 the IASB published an exposure draft (2007 ED) of proposals to simplify the 2003 requirements by providing exemptions for transactions that met specified conditions. However, many respondents to the 2007 ED said that the proposed exemptions are insufficient and the revised standard would still be too complex.
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Under the 2008 ED issued today, the revised exemption would not require state-controlled entities to assess the extent of state influence. It would exempt such entities from providing full details about transactions with other state-controlled entities and the state. Instead, (unlike the 2007 ED) the 2008 ED would require general disclosures about the types and extent of significant transactions. The 2007 ED also proposed to amend the definition of a related party to clarify the intended meaning and remove inconsistencies. Respondents were largely in agreement with the revised definition of a related party. The IASB intends to finalise the definitions of a related party and of a related party transaction without further exposure (apart from one minor matter raised in the 2008 ED) and will issue them when it issues the amendments resulting from the 2008 ED. |
Comments are requested by 13 March 2009. Click for press release (PDF 47k). The ED is available on the IASB's website.
