Section 3840 - Related party transactions
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Effective date: |
January 1, 2011 except for subsequent amendments |
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Published by the AcSB: |
December 2009 |
Reach out to our Section 3840 Specialist |
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Overview
This Section establishes standards for the measurement and disclosure of related party transactions in the financial statements.
The section provides that a related party transaction is measured at the carrying value, unless certain exceptions are met:
- A related party monetary transaction (or non-monetary transaction with commercial substance) that is in the normal course of operations should be measured at the exchange amount (with certain exceptions).
- A related party monetary transaction (or non-monetary transaction with commercial substance) that is not in the normal course of operations should be measured at the exchange amount if the change in the ownership interest of the item transferred is substantive (i.e., 20% or more) or when the degree of influence over the item transferred has substantively changed, and the exchange amount is supported by independent evidence.
When a related party transaction is measured at the exchange amount, any gain or loss resulting from the transaction shall be included in income for the period, unless another Section requires alternative treatment. In contrast, when a related party transaction is measured at the carrying amount, any difference between the carrying amounts of items exchanged, together with any tax amounts related to the items transferred, shall be included as a charge or credit to equity.
The standard provides guidance on the accounting for specific types of related party transactions including common control business combinations.
History of Section 3840
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Date |
Development |
Comments |
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December 2009 |
Part II of the CPA Canada Handbook issued |
Effective for fiscal years beginning on or after January 1, 2011. |
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April 2010 |
Amendments to address certain drafting issues. |
Paragraph .44(b) has been amended to address inconsistencies within the Section. Effective for fiscal years beginning on or after January 1, 2011. Earlier application is permitted. |
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December 2018 |
Amendments to clarify that the Section does not apply to related party financial instruments. |
Amendments to paragraphs 3840.01-.02, 3840.16, and 3840.37 and new paragraphs 3840.03(g)(i), 3840.07A and 3840.07B, issued in December 2018, apply to annual financial statements relating to fiscal years beginning on or after January 1, 2021. Earlier application is permitted. |
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September 2023 |
Amendments to clarify the application of Section 1582 to business combinations under common control. |
These amendments are effective for fiscal years ending on or after January 1, 2025. Earlier application is permitted, including in financial statements not yet authorized for issue. |
Note: The above summary does not include details of consequential amendments made as the result of other projects.
Private Enterprise Advisory Committee Meeting Notes
- February 2, 2017 - Discussed challenges with the application of Section 3840, Related Party Transactions.
- December 1, 2016 - challenges with the application of Section 3840
- October 6, 2015 - Related Party Transactions: Measurement of Related Party Transactions for Not-for-Profit Organizations
