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Chapter 19 Lecture Notes
Chapter 19 Lecture Notes
Chapter 19 Lecture Notes
Leung
LEARNING OBJECTIVES
• Explain the objective of IAS 24
• Identify an entity’s related parties
• Describe and apply the disclosures required by IAS 24
Objective
• ‘. . . to ensure that an entity’s financial statements contain the disclosures necessary to an understanding
of the potential effect of transactions and outstanding balances and commitments with related parties.’
(IAS 24.1)
• Major issues to be considered:
- Identifying related parties
- Identifying related party arrangements
- Deciding on the type and extent of the disclosure (IAS 24.2)
(iii) is a member of the key management personnel of the reporting entity or of a parent of the reporting
entity
Part b — An entity is related to a reporting entity if any of the following conditions apply:
(i) The entity and the reporting entity are members of the same group
(ii) The entity is an associate or joint venture of the entity (or an associate or joint venture of a member of
a group of which the other entity is a member)
(iii) Both entities are joint ventures of the same third party
(iv) An entity is a joint venture of a third entity and the other entity is an associate of the third entity
(v) 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 such a plan, the sponsoring
employers are also related to the reporting entity
(vi) The entity is controlled or jointly controlled by a person identified in part (a)
(vii) A person identified in (a)(i) 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
IAS 24.9(b)(ii)
KMP
IAS 24.9(b)(vii)
- entities are not related parties simply because they have a director or a member of key management
personnel in common, or because they share joint control in a joint venture.
- parties an entity engages with for a significant volume of its business are not related parties to the
entity simply as a result of the economic dependence that may arise.
5 ACCT4104 Advanced Financial Accounting Dr. Winnie S.C. Leung
Disclosure
• The minimum disclosures are detailed under IAS 24.18 and are summarised below.
- the amount of the transactions
- the amount of the outstanding balances and commitments
- their terms and conditions and whether they are secured, and the nature of the settlement
consideration to be provided
- details of any guarantees provided or received
- provisions for doubtful debts related to outstanding balances
- the expense recognised during the period in respect of bad or doubtful debts due from related parties.
• A major focus of the disclosure requirements of IAS 24 is directed towards revealing the remuneration
arrangements made for key management personnel. These disclosures, contained in IAS 24.17, are
required in total and for each of a range of categories and are shown below:
- short-term employee benefits
- post-employment benefits
- other long-term benefits
- termination benefits
- share-based payment.
~~ End of Chapter 19 ~~