PAS 24

RELATED

PARTY
DISCLOSURES
by: Ainah N. Sangcayo
 OBJECTIVE AND
SCOPE
• PAS 24 prescribes the nec essary disclosure s
regarding relate d party re lationships and
transactions, outsta nding bala nces and c ommitme nts
between an entity and its related pa rtie s.
 CORE
PRINCIPLE
-The financial position and profit or loss of an entity
maybe affected by a re la ted pa rty
relationship eve n if related party transac tions do not
occur . The mere e xistence of the relationship may be
sufficients to affe ct the transaction of the e ntity with
other parties.
 RELATED PARTY

• a person or entity that is

related to the entity that is
preparing its financial
statements.
 RELATED PARTY

Parties who have:

• Ability to control the othe r pa rty.
• Ability to exe rc ise significa nt influe nce ove r the
other party.
• Joint control ove r the entity.
 CONTROL

• has the power over the

investee or the power to
gove rn

• owne rship is more than

half of the voting power
of an e ntity (51% above )
SIGNIFICANT INFLUENCE

• has the power t o

participate, but not to
control
• ownership is 20% or
more
 SIGNIFICANT INFLUENCE

Some indica tion that a pa rty ha s

significant influe nce over the other
• represen t in the BOD
• particip ation in p olic y making process
• materia l tra nsa c tio n between the investor
and inv e ste e
• intercha ng e of ma na gerial personnel
• provision of essential technical information
 JOINT
CONTROL

• contractually agreed of
sharing of control over
an economic activity
 Example of Related Parties

Ha s control ove r the entity

• entities that pe rtain to a ffiliates suc h as the parent, subsidiary and
fellow subsidia ry
Associates
• entities over whic h one pa rty e xercise s significant influence
Venturer
• usually pertains to joint venture
Ke y manage ment personnel
• has authority and responsibility for planning, direc ting,and c ontrolling
the activities of the entity
 Example of Related Parties

Close Family M embe rs

• Family membe rs expe cted to influenc e or be influenc ed by that
individual in the ir de alings
• The individual’s spouse and children
• Children of the individual’s spouse
• Dependents of the individual or the individual’s spouse
Individuals with significa nt influenc e a nd their fa mily me mbers

Postemployment benefit pla n entities

• Those whose postemployment pla n of e mployee s by the busine ss are
handled by these e ntitie s.
 RELATED PARTY
TRANSACTION

• Transfer of resources or
obligations between
related parties,
regardless of whether a
price is charged.
 RELATED PARTY TRANSACNTION Examples
PAS 24, paragraph 20

• Purchase a nd sa le of goods
• Purchase a nd sa le of prope rty a nd other asset
• Rendering or re ceiving service s
• Leases
• Transfe r of research and deve lopment
• License agre ement
• And othe rs...
 RELATED PARTY DISCLOSURES
PAS 24, paragraph 12

• Requires disclosure of re lated pa rty rela tionships where c ontrol e xists

irrespe ctive of whethe r the re have been transac tions be tween the re lated
parties
• Disclose the na me of the entity’s parent and if different, the ultimate
controlling party.
• If neithe r produc es FS for public use , the na me of the ne xt most senior
parents shall also be disclosed
 RELATED PARTY DISCLOSURES
PAS 24, paragraph 17

• Minimum discloseres:
-Amount of the transaction
- Amount of outstanding bala nce, te rms and c onditions
- The a llowanc e for doubtful a ccounts related to outstanding balanc e
- The e xpense rec ognized during the period re lated to doubtful ac counts
 KEY MANAGEMENT PERSONNEL
COMPENSATION
PAS 24, paragraph 16
• Disclose key ma nage ment personnel compe nsa tion in total and for eac h
of the following ca tegories:
-short-te rm e mployee benefits
-Postemployme nt bene fits, for exa mple,retire ment pensions
- other long-te rm be nefits
- Te rmina tions be nefits
- Share based pa yment transaction, for example ,sha re options
 UNRELATED
PARTIES
• Two entitie s with same dire ctor or ke y manage ment
personnel
• Providers of esse ntials goods (finance , tra de
unions,public utilities etc) in the c ourse of normal
dealings
• A single c ustome r, supplie r, fra nchisor or gene ra l
agent with
• Two venture rs simply be cause the y share joint
control over a joint ve nture
THANKYOU!