Related Party

Disclosures
• Related Party
1. One party has control over the other party
2. One party has significant influence over the other
party
3. Joint Control
• Control
1. Power over the investee
2. Power to govern
3. More than half of the voting power
• Significant influence
1. Power to participate
2. 20% or more share ownership
• Representation in the board of directors
• Participation in policy making process
• Material Transactions between investor and the
investee
• Interchange of managerial personnel
• Provision of essential technical information
• Affiliates
• Associates
• Venturer
• Key management personnel
• Close family members
• Individuals
• Postemployment benefit plan for the benefit of
employees
• Purchase and sale of goods
• Purchase and sale of property and other asset
• Rendering or receiving services
• Leases
• Transfer of research and development
• License agreement
• Finance arrangements, including loans and equity
contributions in cash or in kind
• Guarantee and collateral
• Settlement of liabilities on behalf of the entity or by the
entity on behalf of another party
• Relationships between parents and subsidiaries
shall be disclosed regardless whether there have
been transactions between the related parties
• The amount of the transaction
• The amount of outstanding balance
i. Terms and conditions
ii. Secured or unsecured
iii. Nature of consideration
• The allowance for doubtful accounts related to the
outstanding balance
• Doubtful accounts expense recognized during the
period in respect of amount due from related
parties.
• Short-term employee benefits
• Postemployment benefits (e.g. Retirement
Pensions)
• Other long-term benefits
• Termination Benefits
• Share based payment transactions (e.g. Share
options)
• Two entities simply because they have a director or key
management personnel in common
• Providers of finance, trade unions, public utilities and
government agencies in the course of their normal
dealings with an entity by virtue only of those dealings.
• A single customer, supplier, franchisor or general agent
with whom an entity transacts a significant volume of
business merely by virtue of the resulting economic
dependence.
• Two venturers simply because they share joint control
over a joint venture
Example
San Beda Company reported the following
remuneration and other payments made to the
entity’s chief executive officer during the current
year:

Annual Salary 200,000

Share options and other share-based payments 100,000
Contributions to retirement benefit plan 50,000
Reimbursement of travel expenses for business trips 120,000

What total amount should be disclosed as

compensation to key management personnel?
Annual Salary 200,000
Share options and other share-based payments 100,000
Contributions to retirement benefit plan 50,000
Total 350,000
Example
San Beda Company acquired 100% of CEU Company in
the prior year. During the current year, the individual
entities included in their financial statements the
following:
SBC CEU
Key Officers’ salaries 75,000 50,000
Officers’ expenses 20,000 10,000
Loans to officers 125,000 50,000
Intercompany Sales 1,500,000

What total amount should be reported as related party

disclosures in the notes to San Beda Company’s
consolidated financial statements for the current year?
Loans to officers:
San Beda 125,000
CEU 50,000
Key Officers’ salaries:
San Beda 75,000
CEU 50,000
300,000

Intercompany sales are no longer disclosed when

consolidated financial statements are prepared.