IND AS 24: Related Party Disclosures

Himanshu Goel , Last updated: 01 August 2020
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Objective of Disclosures:-

The purpose is to provide users of the financial statements information about transaction, outstanding balances, including commitments, and relationships with related parties that may affect their assessment of an entity's operations, including assessment of the risk and opportunities facing an entity.

Related Parties as per IND AS 24 are: -

1. A Person or a close member of that person's family is related to a reporting entity if any one criteria is fullfilled.

Name of Person	Control or Joint Control (50 % or more voting rights)	Significant Control (20% or more)	KMP of reporting entity or parent of reporting Entity	Remarks
A	a	r	r	Related
B	r	a	r	Related
C	r	r	a	Related
D+E(relative)	a	r	r	Related
F	r	r	r(in Parent Co.)	Related

2. Entity is related to reporting Entity If Following testing procedure is completed.

For A Related Party criteria to be applied is:-

Compulsory Test on Other Entity (+) Additional Test on Reporting Entity

Assuming ABC Ltd is reporting Entity and WYZ ltd is the entity which is to be checked weather related or not.

Name of Person	Compulsory Test:-	Additional Test
	Control on WYZLtd	Controlled ABC Ltd.	Significant Influence on ABC Ltd	KMP of ABC Ltd or Parent of ABC	Remarks
A	a	a	r	r	ABC Ltd And WYZ Are related party.
B	a	r	a	r	ABC Ltd And WYZ Are related party.
C	a	r	r	a	ABC Ltd And WYZ Are related party.
D	Significant Influence	r	r	a	ABC Ltd And WYZ are not related party.
E	Significant Influence	r	a	r	ABC Ltd And WYZ are not related party.
F	KMP	r	a	r	ABC Ltd And WYZ are not related party.
G	KMP	r	r	a	ABC Ltd And WYZ are not related party.

3. If the person controlling the reporting entity has any significant control on other entity or is KMP of other entity, the other entity is treated as Related Party.

4. An Entity is related to reporting entity if any of the following conditions applies:-

a. 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).

b. One entity is an associate or joint ventures of the other entity is an associate of the third party.

c. Both entities are joint ventures of a third entity.

d. One entity is a joint venture of a third entity and the other entity is an associate of the third entity.

AS a Result Following Interpretation can be Drawn:-

Subsidiary and Parent are related to each other.
Joint Venture and Investor are related to each other.
Associates and investor are related to each other.
Fellow Subsidiary are related to each other.
Fellow Joint Ventures are related to each other.
Fellow Associates are not related to each other.
Subsidiary and Associate of same entity are related to each other.(Not as per AS 18)
Subsidiary/ JV / Associate of Subsidiary is related to Parent and vice versa.

5. Following are the parties specifically not deemed to be related parties.

Provider of finance
Trade utilities
Public utilities
Department and agencies of a govt. that does not control, jointly control, or significantly influence the reporting entity.
A customer, supplier, franchiser, distributor or general agent with whom entity transact a significant volume of business, simply by virtue of the resulting economic dependence.

6. Some Important issues.

Under IND AS 24 the definition of the KMP includes any director whether executes or otherwise. AS 18 excludes non-executive director from the definition of KMP.

Ind AS defines family as follows:-

That person's children, spouse or domestic partner, brother, sister, father and mother,
Children of that person's spouse or domestic partner; and
Dependents of that person or that person's spouse or domestic partner.

Ind-As also include close members of that families of key managerial personnel (KMP's) as related party as well as those of persons who exercise control/ significant influence over the reporting Entity.

7. Disclosures:-