Summary Business Accounting

Question:

The Financial Accounting Standards Board has provided guidance on disclosures of transactions between

related parties, for example, transactions between subsidiaries of a common parent. GAAP regarding

relatedparty transactions requires all of the following disclosures except

a. The nature of the relationship involved.

b. A description of the transactions for each period an income statement is presented.

c. The dollar amounts of transactions for each period an income statement is presented.

d. The effect on the cash flow statement for each period a cash flow statement is presented.



Answer:



d. GAAP requires disclosure of related-party transactions except for compensation agreements,

expense allowances, and transactions eliminated in consolidated working papers. Required

disclosures include the relationship(s) of the related parties; a description and dollar amounts

of transactions for each period presented and the effects of any change in the method of

establishing their terms; and amounts due to or from the related parties and, if not apparent,

the terms and manner of settlement. The effect on the cash flow statement need not be

disclosed.