Ind AS 24, Related Party Disclosures | AS 18 vs Ind AS 24 (all details)

Ind AS 24, Related Party Disclosures: The objective of Ind AS 24 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.

Related party disclosure requirements as laid down in this Standard do not apply in circumstances where providing such disclosures would conflict with the reporting entity’s duties of confidentiality as specifically required in terms of a statute or by any regulator or similar competent authority.

In case a statute or a regulator or a similar competent authority governing an entity prohibits the entity to disclose certain information which is required to be disclosed as per this Standard, disclosure of such information is not warranted. For example, banks are obliged by law to  maintain confidentiality  in respect of their customers’ transactions and this Standard would not override the obligation to preserve the confidentiality of customers’ dealings.

A related party is a person or entity that is related to the entity that  is preparing its financial statements. (in the Standard referred as ‘reporting entity’)

• A person or a close member of that person’s family is related to a reporting entity if that person:
  • has control or joint control of the reporting entity;
  • has significant influence over the reporting entity; or
  • is a member of the key management personnel of the reporting entity or of a parent of the reporting
• An entity is related to a reporting entity if any of the following

conditions applies:

• 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).
• 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).
• Both entities are joint ventures of the same third party.
• One entity is a joint venture of a third entity and the other  entity is an associate of the third
• 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.
• The entity is controlled or jointly controlled by a person identified in (a).
• 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).
• 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

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.

Close members of the family of a person are those family members who may be expected to influence, or be influenced by, that person in  their dealings  with the entity including:

• that person’s children, spouse or domestic partner, brother, sister, father and mother;
• children of that person’s spouse or domestic partner; and
• dependants of that person or that person’s spouse or domestic partner.

Relationships between a parent and its subsidiaries shall be disclosed irrespective of whether there have been  transactions  between  them.  An entity shall disclose the name of its parent and, if different, the ultimate controlling party. If neither the entity’s parent nor the ultimate controlling party produces consolidated financial statements available for public use, the name of the next most senior parent that does so shall also be disclosed.

An entity shall disclose key management personnel  compensation  in  total and for each of the following categories:

• short-term employee benefits;
• post-employment benefits;
• other long-term benefits;
• termination benefits; and
• share-based (Paragraph 17 of the Standard)

If an entity has had related party transactions  during the periods covered by the financial statements, it shall disclose the nature of the related party relationship as well as information about those transactions and outstanding balances, including commitments, necessary for users to understand the potential effect of the relationship on the financial statements.  These disclosure requirements are in addition to those in paragraph 17 of the Standard. At a minimum, disclosures shall include:

• the amount of the transactions;
• the amount of outstanding balances, including commitments, and:
  • their terms and conditions, including whether they are secured, and the nature of the consideration to be provided in settlement; and
  • details of any guarantees given or received;
• provisions for doubtful debts related to the amount of outstanding balances; and
• the expense recognised during the period in respect of bad or doubtful debts due from related (Paragraph 18 of the Standard)

The Standard requires that the disclosures, as per parag raph 18 of the Standard, shall be made separately for each of the following categories:

• the parent;
• entities with joint control of, or significant influence over, the entity;
• subsidiaries;
• associates;
• joint ventures in which the entity is a joint venturer;
• key management personnel of the entity or its parent; and
• other related

Items of a similar nature may be disclosed in aggregate except  when  separate disclosure is necessary for an understanding of  the  effects  of related party transactions on the financial statements of the entity.

Disclosure of details of particular transactions with individual related parties would frequently be too voluminous to be easily understood.  Accordingly, items of a similar nature may be disclosed in aggregate by type of related  party. However, this is not done in such a way as  to obscure the importance   of significant transactions. Hence, purchases or sales of goods are not aggregated with purchases or sales of fixed assets. Nor a material related  party transaction with an individual party is clubbed in an aggregated disclosure.

A reporting entity is exempt from the disclosure requirements  of  paragraph  18 of the Standard in relation to related party transactions and outstanding balances, including commitments, with:

• a government that has control or joint control of, or  significant  influence over, the reporting entity; and
• another entity that is a related party because the same  government  has control or joint control of, or significant influence over, both the reporting entity and the other (Paragraph 25 of the Standard)

If a reporting entity applies the exemption in paragraph 25 of the Standard, it shall disclose the following about the transactions and related outstanding balances referred to in paragraph 25 of the Standard:

• the name of the government and the nature of its relationship with the reporting entity (ie control, joint control or significant influence);
• the following information in sufficient detail to enable users of the entity’s financial statements to understand the effect of related party transactions on its financial statements:
  • the nature and amount of each individually significant transaction; and
  • for other transactions that are collectively, but not individually, significant, a qualitative or quantitative indication of their extent. Types of transactions include those listed in paragraph 21 of the Standard.

Difference Between AS 18 and Ind AS 24

Basis	Ind AS 24	AS 18
Definition of Relative	Uses the term ― a close member of the family of a person	Uses the term ― relatives of an individual.
Relative covers	Children, spouse or domestic partner, brother, sister, father and mother; children of that person‘s spouse or domestic partner; and dependants of that person or that person‘s spouse or domestic partner.	Covers the spouse, son, daughter, brother, sister, father and mother
KMP	Covers KMP of the parent as well	KMP of the entity only
Related Parties in case of Joint Venture	Co-venturers or co-associates are related to each other.	Co-venturers or co-associates are not related to each other
Post-employment Benefits	Specifically includes post-employment benefit plans for the benefit of employees of an entity or its related entity as related parties.	Does not specifically cover entities that are post-employment benefit plans, as related parties
Next Most Senior Parent	Additional disclosure is required for such parent.	No such provision
Disclosure for Compensation	Extended disclosures for compensation of KMP under different categories	Not required.
Disclosure of ‘Amount of the Transactions’ vs ‘Volume of the Transactions	The amount of the transactions need to be disclosed	Option to disclose the – Volume of the transactions either as an amount or as an appropriate proportion
Government Related Entities	Disclosures of certain information by the government related entities.	Presently exempts the disclosure of such information

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