RELATED PARTY DISCLOSURES
OBJECTIVE AND SCOPE:
● PAS 24 prescribes the necessary disclosures regarding related party relationships and
transactions, outstanding balances, and commitments between an entity and its related parties.
● To promote neutrality, this standard was promulgated to ensure that an entity’s financial
statements contain the disclosures necessary to draw attention to the possibility that its parties
and by transactions with such parties.
● This standard shall be applied in preparing and presenting separate financial statements and
consolidated financial statements.
WHAT IS A RELATED PARTY?
● A related party is a person or entity that is related to the reporting entity.
Parties are considered to be related if one party has:
• The ability to control the other party
• The ability to exercise significant influence over the other party
• Joint control over the reporting entity
● What control means here is that it is the power over investee or the power to govern the
financial and operating policies of an entity so as to obtain benefits.
● Control is also an ownership directly or indirectly through subsidiaries or more than half of the
voting power of an entity.
● As for significant influence, it is the power to participate in the financial and operating policy
decision of an entity, but not control of those policies.
● Significant influence may be gained by share ownership of 20% or more.
EXAMPLE:
If an investor holds, directly or indirectly through subsidiaries, 20% or more of the voting
power of the investee, it is presumed that the investor has a significant influence, unless
it can be clearly demonstrated that this is not the case.
● Next is the joint control, which means the contractually agreed sharing of control over an
economic activity or a member of the key management personnel of the reporting entity or of a
parent of the reporting entity.
WHAT AR THE EXAMPLES OF RELATED PARTIES?
• Affiliates - meaning the parent, the subsidiary, and fellow subsidiaries
OBJECTIVE AND SCOPE:
● PAS 24 prescribes the necessary disclosures regarding related party relationships and
transactions, outstanding balances, and commitments between an entity and its related parties.
● To promote neutrality, this standard was promulgated to ensure that an entity’s financial
statements contain the disclosures necessary to draw attention to the possibility that its parties
and by transactions with such parties.
● This standard shall be applied in preparing and presenting separate financial statements and
consolidated financial statements.
WHAT IS A RELATED PARTY?
● A related party is a person or entity that is related to the reporting entity.
Parties are considered to be related if one party has:
• The ability to control the other party
• The ability to exercise significant influence over the other party
• Joint control over the reporting entity
● What control means here is that it is the power over investee or the power to govern the
financial and operating policies of an entity so as to obtain benefits.
● Control is also an ownership directly or indirectly through subsidiaries or more than half of the
voting power of an entity.
● As for significant influence, it is the power to participate in the financial and operating policy
decision of an entity, but not control of those policies.
● Significant influence may be gained by share ownership of 20% or more.
EXAMPLE:
If an investor holds, directly or indirectly through subsidiaries, 20% or more of the voting
power of the investee, it is presumed that the investor has a significant influence, unless
it can be clearly demonstrated that this is not the case.
● Next is the joint control, which means the contractually agreed sharing of control over an
economic activity or a member of the key management personnel of the reporting entity or of a
parent of the reporting entity.
WHAT AR THE EXAMPLES OF RELATED PARTIES?
• Affiliates - meaning the parent, the subsidiary, and fellow subsidiaries
