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IAS 24 — Key management personnel services

Date recorded:

In May 2012, the IASB published Exposure Draft ED/2012/1 Annual Improvements to IFRSs 2010-2012 Cycle which proposed to amend IAS 24 Related Party Disclosures to clarify the identification and disclosure requirements for related party transactions that take place when key management personnel services are provided by a management entity that is not otherwise a related party of the reporting entity by extending the definition of a ‘related party’ to include management entities, extending the disclosure requirements of IAS 24 to require the separate disclosure of transactions for the provisions of key management personnel services and excluding from the disclosure requirements of IAS 24  key management personnel compensation that is provided by a management entity to its own employees.

The Staff provided an analysis of comment letters received on the proposed amendments, in which the majority of respondents agreed with the proposed amendments. However, specific concerns were raised with several aspects of the proposals including key management personnel compensation disclosure, symmetry in the identification of related parties, parent of the reporting entity, disclosures about the nature of services provided, definition of key management personnel services, effects of the related party relationship on other group companies and sundry drafting suggestions.

The Staff asked the Interpretations Committee to recommend the following amendments to the IASB:

  1. amend the proposed amendment to paragraph 9(b)(iii) to include a reference to the parent of the reporting entity;
  2. add the following to paragraph 18 regarding additional disclosures about the nature of KMP services provided:
    Information should also be disclosed about the nature and extent of the key management personnel services provided by such an entity including, for example, the number of personnel employed in providing these services to the entity
  3. revise the wording in the May 2012 ED to include the drafting suggestions as follows:
    • replacing ‘hires’ with ‘obtains’, in paragraph 17A
    • Replacing the words ‘recognised as an expense’ with the word ‘incurred’.

The Staff asked the Interpretations Committee whether they agreed with the Staff recommendation not to revise the proposed amendments in respect of:

  1. key management personnel compensation disclosure
  2. symmetry of related parties
  3. the definition of KMP services
  4. the effect of the related party relationship on other group companies.

The Staff also asked the Interpretations Committee whether they agreed with the Staff recommendation to retain the transitional provisions and effective date as proposed in the ED with respect to the proposed amendments to IAS 24?

The Staff also asked the Interpretations Committee whether they agreed with the Staff recommendation to amend the Basis for Conclusions as proposed in the ED to include references to ‘identification’ as well as ‘disclosure’?

Lastly the Staff asked the Interpretations Committee whether they agreed with the Staff recommendation to add the text that summarises the IASB’s considerations in reaching its conclusions on the proposed amendment as a self-contained section of the Basis for Conclusions?

No significant comments were made by Committee members – only drafting.  The majority of the Interpretations Committee tentatively agreed with the Staff recommendations.

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