IASB amends IAS 24 on related parties
Nov 04, 2009
The IASB has revised IAS 24 'Related Party Disclosures' to provide a partial exemption from the disclosure requirements for government-related entities and to clarify the definition of a related party.
The Board did not change the fundamental approach to related party disclosures contained in previous version of IAS 24, which requires entities to disclose information about related party relationships and transactions.
The revisions respond to concerns that the previous disclosure requirements and the definition of a related party were too complex and difficult to apply in practice, especially in environments where government control is pervasive.
The revised standard addresses those concerns by:
- Providing a partial exemption for government-related entities. Until now, if a government controlled, or significantly influenced, an entity, the entity was required to disclose information about all transactions with other entities controlled, or significantly influenced by the same government. The revised standard still requires disclosures that are important to users of financial statements but eliminates requirements to disclose information that is costly to gather and of less value to users. It achieves this balance by requiring disclosure about these transactions only if they are individually or collectively significant.
- Providing a revised definition of a related party.
The revised standard also clarifies that disclosure is required of any commitments of a related party to do something if a particular event occurs or does not occur in the future, including executory contracts (recognised and unrecognised).
The revised standard is effective for annual periods beginning on or after 1 January 2011, with earlier application permitted. Click for IASB Press Release (PDF 106k).