PAS 24 RELATED PARTY DISCLOSURE
I. NATURE
PAS 24 prescribes the guidelines in identifying related party relationships, transactions,
outstanding balances and commitments, and the necessary disclosures for these items.
Related party relationships are a common feature of business.
Related party disclosures are necessary to indicate the possibility that an entity’s
financial position and performance might have been affected by the existence of such
relationship. This is because related parties often enter into transactions that unrelated
parties often enter into transactions that unrelated parties would not.
Related parties
Parties are related if one party has the ability to affect the financial and operating
decisions of the other party through control, significant influence or joint control.
Examples of related parties:
1. Parent and its subsidiary.
2. Fellow subsidiaries with a common parent.
3. Investor and its associate; and the associate’s subsidiary.
4. Venturer and the joint venture; and the joint venturer’s subsidiary.
5. A joint venture and an associate of a common investor.
6. Key management personnel of the reporting entity or of the reporting entity’s
parent.
7. A person who has control, significant influence or joint control over the reporting
entity.
8. Close family member of the person referred to in (6) and (7)
9. Post-employment benefit plan of the employees of either the reporting entity or
an entity related to the reporting entity.
Control, significant influences and joint control refer to the degree of one party’s ability
to affect the relevant decisions of another.
Key management personnel are “those persons having authority and
responsibility for planning, directing and controlling the activities of the entity,
directly or indirectly, including any director (whether executive or otherwise) of
that entity.” (PAS 24.9)
Close family member is one who may be expected to influence, or be influenced
by, the person in his/her dealings with the reporting entity. It includes the
person’s spouse, their children and their dependents.
II. DISCLOSURE
A parent-subsidiary relationship is disclosed even if there have been no transactions
between them during the period.
A subsidiary discloses the name of its parent, and if different, the name of the ultimate
parent. If neither of these two prepares consolidated financial statements for public use,
the subsidiary discloses the name of the next most senior parent that does so.
Key management personnel compensation
An entity discloses the total key management personnel compensation broken down as
follows:
a. Short-term employee benefits;
b. Post-employment benefits;
c. Other long-term benefits;
d. Termination benefits; and
e. Share-based payment.
Related party transactions
A related party transaction is “a transfer of resources, services or obligations between a
reporting entity and a related party, regardless of whether a price is charged.” (PAS
24.9)
Examples of transactions that are disclosed if they are with a related party:
a. Purchase or sales of goods, services or other assets
b. Leases
c. Transfers of research and development
d. Transfers under license agreements
e. Loans and other financing arrangements, including equity contributions
f. provision of guarantees or collateral
g. Commitments
h. Settlement of liabilities by or on behalf of either party
i. Participation by a parent or subsidiary in a defined benefit plan wherein risks are
shared
The following are disclosed when there are related party transactions during the periods
covered by the financial statements:
a. Nature of the related party relationship
b. Nature, terms and amount of the transaction and outstanding balances
c. Doubtful debts recognized on the outstanding balances
Related party transactions and their outstanding balances are disclosed in an entity’s
separate or individual financial statements. These, however, are eliminated in the
group’s consolidated financial statements.
Disclosures that related party transactions were on arm’s length basis are not made
unless this can be substantiated.
Government-related entities
A government-related entity is “an entity that is controlled, jointly controlled or
significantly influenced by a government.” (PAS 24.4)
A government-related entity discloses the following if there have been related party
transactions with the government:
a. Name of the government and the nature of the relationship
b. Nature and amount of each individually significant transaction
c. Other transactions that are collectively significant but are individually insignificant
