Section 33

Section 33
Related Party Disclosures

Overview
• Scope
• Definition of related party
• Classification
• disclosure
• Comparison with full IFRS
Scope
This section requires an entity to
include in its financial statements the
disclosures necessary to draw
attention to the possibility that its
financial position and profit or loss
have been affected by the existence
of related parties and by transactions
and outstanding balances with such
parties
Definition
• A related party is a person or entity that is related to the
entity that is preparing its financial statements (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) is a member of the key management personnel of the
reporting entity or of a parent of the reporting entity;
(ii) has control over the reporting entity; or
(iii) has joint control or significant influence over the reporting
entity or has significant voting power in it.
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) Either entity is an associate or joint venture of the other
entity (or of a member of a group of which the other entity is
Definition
(iii). both entities are joint ventures of a third entity.
(iv) either 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
plan.
(vi) the entity is controlled or jointly controlled by a
person identified in (a).
(vii) a person identified in (a)(i) has significant
voting power in the entity.
Definition
(viii) a person identified in (a)(ii) has
significant influence over the entity or
significant voting power in it.
(ix) a person or a close member of that
person’s family has both significant influence
over the entity or significant voting power in
it and joint control over the reporting entity.
(x) a member of the key management
personnel of the entity or of a parent of the
entity, or a close member of that member’s
family, has control or joint control over the
reporting entity or has significant voting
power in it.
Disclosure
Disclosure of parent-subsidiary
relationships
 Relationships between a parent and its
subsidiaries shall be disclosed irrespective of
whether there have been related party
transactions.
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 financial
statements available for public use, the name
of the next most senior parent that does so (if
Disclosure
Disclosure of key management personnel
compensation
 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.
 Compensation includes all employee benefits (as
defined in Section 28 Employee Benefits) including
those in the form of share-based payment (see
Section 26 Share-based Payment).
 Employee benefits include 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.
Disclosure
Disclosure of related party transactions
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.
Examples of related party transactions that are common
to SMEs include, but are not limited to:
 Transactions between an entity and its principal
owner(s).
 Transactions between an entity and another entity
when both entities are under the common control of a
single entity or person.
 transactions in which an entity or person that controls
the reporting entity incurs expenses directly that
otherwise would have been borne by the reporting
Disclosure
If an entity has related party transactions, it shall disclose the nature
of the related party relationship as well as information about the
transactions, outstanding balances and commitments necessary
for an understanding of the potential effect of the relationship on
the financial statements. At a minimum, disclosures shall include:
(a) The amount of the transactions.
(b) The amount of outstanding balances and:
(i) their terms and conditions, including whether they are
secured, and the nature of the consideration to be provided in
settlement, and
(ii) details of any guarantees given or received.
( C ) provisions for uncollectible receivables related to the amount of
outstanding balances.
(d) The expense recognized during the period in respect of bad or
doubtful debts due from related parties. Such transactions could
include purchases, sales, or transfers of goods or services;
leases; guarantees; and settlements by the entity on behalf of
the related party or vice versa
Differences between IFRS for
SMEs and Full IFRS
• IAS 24 paragraph 17 requires the disclosure
of key management personnel
compensation both in total and also
classified in the following categories: short-
term employee benefits, post-employment
benefits, other long-term benefits,
termination benefits, and share-based
payment. Paragraph 33.7 requires the
disclosure of key management personnel
compensation in total only—it does not
explicitly require any categorization of such
compensation

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Section 33

Related Party Disclosures

If neither the entity’s parent nor the ultimate

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