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IFRS Key Concepts of IAS 24 Disclosure of Information of Related Party

IFRS Key Concepts of IAS 24 Disclosure of Information : In April 2001 the International Accounting Standards Board (the Board) adopted IAS 24 Related Party Disclosures, which had originally been issued by the International Accounting Standards Committee in July 1984. In December 2003 the Board issued a revised IAS 24 as part of its initial agenda of technical projects that included amending disclosures on management compensation and related party disclosures in separate financial statements. The Board revised IAS 24 again to
address the disclosures in government-related entities.

IFRS Key Concepts of IAS 24 Disclosure of Information of Related Party

In November 2009 the Board issued a revised IAS 24 to simplify the definition of ‘related party’ and to provide an exemption from the disclosure requirements for some government-related entities. Other Standards have made minor consequential amendments to IAS 24. They include IFRS 10 Consolidated Financial Statements (issued May 2011), IFRS 11 Joint Arrangements (issued May 2011), IFRS 12 Disclosure of Interests in Other Entities (issued May 2011), IAS 19 Employee Benefits (issued June 2011), Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27) (issued October 2012) and Annual Improvements to IFRSs 2010–2012 Cycle (issued December 2013).

IFRS Key Concepts of IAS 24 Disclosure of Information of Related Party

IFRS Key Concepts of IAS 24 Disclosure of Information of Related Party

IFRS Key Concepts of IAS 24 Disclosure of Information of Related Party

Objective
The objective of this Standard is to ensure that an entity’s financial statements contain the disclosures necessary to draw attention to the possibility that its financial position and profit or loss may have been affected by the existence of
related parties and by transactions and outstanding balances, including commitments, with such parties.

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Scope
This Standard shall be applied in:
(a) identifying related party relationships and transactions;
(b) identifying outstanding balances, including commitments,
between an entity and its related parties;
(c) identifying the circumstances in which disclosure of the items in
(a) and (b) is required; and
(d) determining the disclosures to be made about those items.

IFRS Key Concepts of IAS 24 Disclosure of Information of Related Party

This Standard requires disclosure of related party relationships, transactions and outstanding balances, including commitments, in the consolidated and separate financial statements of a parent or investors with joint control of, or significant influence over, an investee presented in accordance with IFRS 10 Consolidated Financial Statements or IAS 27
Separate Financial Statements. This Standard also applies to individual financial statements.

IFRS Key Concepts of IAS 24 Disclosure of Information of Related Party

Related party transactions and outstanding balances with other entities in a group are disclosed in an entity’s financial statements. Intra group related party transactions and outstanding balances are eliminated, except for those between
an investment entity and its subsidiaries measured at fair value through profit or loss, in the preparation of consolidated financial statements of the group. Purpose of related party disclosures

IFRS Key Concepts of IAS 24 Disclosure of Information of Related Party

Related party relationships are a normal feature of commerce and business. For example, entities frequently carry on parts of their activities through subsidiaries, joint ventures and associates. In those circumstances, the entity
has the ability to affect the financial and operating policies of the investee through the presence of control, joint control or significant influence.

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IFRS Key Concepts of IAS 24 Disclosure of Information of Related Party

A related party relationship could have an effect on the profit or loss and
financial position of an entity. Related parties may enter into transactions that
unrelated parties would not.

IFRS Key Concepts of IAS 24 Disclosure of Information of Related Party
At cost might not sell on those terms to another customer. Also, transactions between related parties may not be made at the same amounts as between unrelated parties. The profit or loss and financial position of an entity may be affected by a related party relationship even if related party transactions do not occur. The mere existence of the relationship may be sufficient to affect the transactions of the entity with other parties. For example, a subsidiary may terminate relations with a trading partner on acquisition by the parent of a fellow subsidiary engaged in the same activity as the former trading partner. Alternatively, one party may refrain from acting because of the significant influence of another—for example, a subsidiary may be instructed by its parent not to engage in research and development.

IFRS Key Concepts of IAS 24 Disclosure of Information of Related Party

For these reasons, knowledge of an entity’s transactions, outstanding balances, including commitments, and relationships with related parties may affect assessments of its operations by users of financial statements, including assessments of the risks and opportunities facing the entity.

Definitions

The following terms are used in this Standard with the meanings specified:
A related party is a person or entity that is related to the entity that is preparing its financial statements (in this Standard referred to as the ‘reporting entity’).
(a) A person or a close member of that person’s family is related to a reporting entity if that person:
  (i) has control or joint control of the reporting entity;
  (ii) has significant influence over the reporting entity; or
  (iii) is a member of the key management personnel of the
reporting entity or of a parent of the reporting entity.
(b) An entity is related to a reporting entity if any of the following
conditions applies:
  (i) The entity and the reporting entity are members of the
same group (which means that each parent, subsidiary and
fellow subsidiary is related to the others).
  (ii) One entity is an associate or joint venture of the other
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) One 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
itself 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 (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).
  (viii) The entity, or any member of a group of which it is a part, provides key management personnel services to the reporting entity or to the parent of the reporting entity. 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.

IFRS Key Concepts of IAS 24 Disclosure of Information of Related Party
Close members of the family of a person are those family members whomay be expected to influence, or be influenced by, that person in their dealings with the entity and include:
(a) that person’s children and spouse or domestic partner.
(b) children of that person’s spouse or domestic partner.
(c) dependants of that person or that person’s spouse or domestic partner.

IFRS Key Concepts of IAS 24 Disclosure of Information of Related Party
Compensation includes all employee benefits (as defined in IAS 19 Employee Benefits) including employee benefits to which IFRS 2 Share-based Payment applies. Employee benefits are all forms of consideration paid, payable or provided by the entity, or on behalf of the entity, in exchange for services rendered to the entity. It also includes such consideration paid on behalf of a parent of the entity in respect of the entity. Compensation includes:
(a) short-term employee benefits, such as wages, salaries and social security contributions, paid annual leave and paid sick leave, profit-sharing and bonuses (if payable within twelve months of the end of the period) and non-monetary benefits (such as medical care, housing, cars and free or subsidised goods or services) for current employees.
(b) post-employment benefits such as pensions, other retirement benefits, post-employment life insurance and post-employment medical care.
(c) other long-term employee benefits, including long-service leave or sabbatical leave, jubilee or other long-service benefits, long-term disability benefits and, if they are not payable wholly within twelve months after the end of the period, profit- sharing, bonuses and deferred compensation.
(d) termination benefits.
(e) share-based payment.

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.

IFRS Key Concepts of IAS 24 Disclosure of Information of Related Party
Government refers to government, government agencies and similar bodies whether local, national or international.
A government-related entity is an entity that is controlled, jointly controlled or significantly influenced by a government.
The terms ‘control’ and ‘investment entity’, ‘joint control’ and ‘significant influence’ are defined in IFRS 10, IFRS 11 Joint Arrangements and IAS 28 Investments in Associates and Joint Ventures respectively and are used in this Standard with the meanings specified in those IFRSs.

In considering each possible related party relationship, attention is directed to the substance of the relationship and not merely the legal form.

In the context of this Standard, the following are not related parties:
(a) two entities simply because they have a director or other member of key management personnel in common or because a member of key management personnel of one entity has significant influence over the other entity.
(b) two joint ventures simply because they share joint control of a joint
venture.
(c)(i) providers of finance,
     (ii) trade unions,
(iii) public utilities, and
     (iv) departments and agencies of a government that does not control,
jointly control or significant influence the reporting entity, simply by virtue of their normal dealings with an entity (even though they may affect the freedom of action of an entity or participate in its decision-making process).
(d) a customer, supplier, franchiser, distributor or general agent with whom an entity transacts a significant volume of business, simply by virtue of the resulting economic dependence.

IFRS Key Concepts of IAS 24 Disclosure of Information of Related Party

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