IAS 24: Related Party Disclosures
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Questions and Answers

What is the primary objective of IAS 24?

  • To regulate the compensation of key management personnel
  • To provide guidance on accounting for transactions with non-related parties
  • To ensure compliance with financial reporting requirements
  • To draw attention to the possibility that an entity's financial position and profit or loss may have been affected by related parties and transactions (correct)

    • Which of the following is NOT a related party according to IAS 24?

  • A subsidiary of the reporting entity
  • A key management personnel of the reporting entity
  • A parent company of the reporting entity
  • A customer of the reporting entity (correct)

    • What is a related party transaction according to IAS 24?

  • A transfer of resources, services, or obligations between unrelated parties
  • A transfer of resources, services, or obligations between related parties, regardless of whether a price is charged (correct)
  • A transaction between a parent company and its subsidiary
  • A transaction between two unrelated entities

    • When did the reissued IAS 24 come into effect?

    <p>1 January 2011</p> Signup and view all the answers

    What is the effective date of the requirement added by Annual Improvements to IFRSs 2010–2012 Cycle?

    <p>1 July 2014</p> Signup and view all the answers

    What information must an entity disclose regarding its parent and ultimate controlling party?

    <p>The name of its parent and, if different, the ultimate controlling party</p> Signup and view all the answers

    What is the definition of key management personnel?

    <p>Those persons having authority and responsibility for planning, directing, and controlling the activities of the entity</p> Signup and view all the answers

    What must an entity disclose if it obtains key management personnel services from a separate management entity?

    <p>The amounts incurred by the entity for the provision of key management personnel services</p> Signup and view all the answers

    What must be disclosed about related party transactions?

    <p>The nature of the related party relationship as well as information about the transactions and outstanding balances</p> Signup and view all the answers

    Under what conditions can an entity make a statement that related party transactions were made on terms equivalent to those that prevail in arm's length transactions?

    <p>If such terms can be substantiated</p> Signup and view all the answers

    Study Notes

    IAS 24 Overview

    • IAS 24 was reissued in November 2009 and applies to annual periods beginning on or after 1 January 2011.
    • The standard requires disclosures about transactions and outstanding balances with an entity's related parties.
    • A related party is a person or entity that is related to the entity that is preparing its financial statements (referred to as the 'reporting entity').
    • The following are deemed not to be related parties: [IAS 24.11]
    • A related party transaction is a transfer of resources, services, or obligations between related parties, regardless of whether a price is charged.
    • Disclosure requirements include:
      • The nature of the related party relationship
      • Information about the transactions and outstanding balances necessary for an understanding of the potential effect of the relationship on the financial statements

    Disclosure Requirements

    • Relationships between parents and subsidiaries:
      • Disclose the name of the parent and, if different, the ultimate controlling party
      • If neither the parent nor the ultimate controlling party produces financial statements available for public use, disclose the name of the next most senior parent that does so
    • Management compensation:
      • Disclose key management personnel compensation in total and for each of the following categories: [IAS 24.17]
      • Key management personnel are those persons having authority and responsibility for planning, directing, and controlling the activities of the entity
    • If an entity obtains key management personnel services from a management entity, disclose the amounts incurred by the entity for the provision of key management personnel services that are provided by the separate management entity

    Effective Dates

    • IAS 24 applies to annual periods beginning on or after 1 January 2011
    • Amendments introduced by Annual Improvements to IFRSs 2010–2012 Cycle are effective for annual periods beginning on or after 1 July 2014

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    Description

    This quiz covers IAS 24, a standard that requires disclosures about transactions and outstanding balances with an entity's related parties, including compensation of key management personnel.

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