Overview

IAS 24 Related Party Disclosures requires disclosures about transactions and outstanding balances with an entity's related parties. The standard defines various classes of entities and people as related parties and sets out the disclosures required in respect of those parties, including the compensation of key management personnel.

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) A person or a close member of that person's family is related to a reporting entity if that person:

1. has control or joint control over the reporting entity;
2. has significant influence over the reporting entity; or
3. is a member of the key management personnel of the reporting entity or of a parent of the reporting entity.

(b) An entity is related to a reporting entity if any of the following conditions applies:

1. 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).
2.  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).
3.  Both entities are joint ventures of the same third party.
4.  One entity is a joint venture of a third entity and the other entity is an associate of the third entity.
5.  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.
6.  The entity is controlled or jointly controlled by a person identified in (a).
7.  A person identified in (a)(1) 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).
8.  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*.

* Requirement added by Annual Improvements to IFRSs 2010–2012 Cycle, effective for annual periods beginning on or after July 1, 2014.

In the context of this Standard, the following are not related parties:

a)     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.

b)    two venturers simply because they share joint control of a joint venture

c)     providers of finance, trade unions, public utilities, and departments and agencies of a government that does not control, jointly control or significantly 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)

d)    a customer, supplier, franchiser, distributor, or general agent with whom an entity transacts a significant volume of business simply by virtue of the resulting economic dependence.

The objective of IAS 24 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 with such parties.  IAS 24 sets out requirements relating to the identification of related party relationships and transactions and the disclosures to be made about these items.  IAS 24 does not address measurement and recognition of related party transactions.