A Practical Guide to Obtaining
Confirmation from Key Management
Personnel on Related Party Disclosures
About The
Institute of
Singapore
Chartered
Accountants
The Institute of Singapore Chartered Accountants (ISCA) is the
national accountancy body of Singapore. ISCA’s vision is to be a
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expertise, knowledge, and networks with diverse stakeholders
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ISCA is the Administrator of the Singapore Qualification Programme
(Singapore QP) and the Designated Entity to confer the Chartered
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For more information, please visit www.isca.org.sg
INTRODUCTION
In Singapore, obtaining confirmations from Key Management
Personnel (KMP) for related party disclosures is an audit procedure
performed by most, if not all auditors for audits performed in
accordance with Singapore Standards on Auditing.
KMP are 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.
With the objective of enhancing consistency among auditors and
within the financial reporting community, ISCA has developed a
practical guide to assist auditors and companies obtain the required
and relevant information pertaining to related party transactions,
arrangements and balances, from identified KMP.
This practical guide has been designed to facilitate compliance
with the disclosure requirements of Singapore Financial Reporting
Standard (FRS) 24 “Related Party Disclosures”, Singapore Companies
Act and Singapore Exchange Listing Manual with regards to KMP.
This practical guide does not provide guidance on the identification
of KMP. Auditors are required to perform separate audit procedures
to ensure that all KMP are appropriately identified.
This practical guide can be further categorised into the following:
• Sections A and B: Confirmations by KMP on related party
disclosures as required for under FRS 24
Auditors are strongly encouraged to use the confirmation
templates in Sections A and B for their audit engagements to
enhance consistency among the profession, when obtaining
KMP confirmations.
• Sections C, D and E: Disclosures required for Directors under
Singapore Companies Act and Singapore Exchange Listing
Manual
The confirmation templates in Sections C, D and E can be used
by the companies to obtain relevant information from Directors
for compliance with some of the more common disclosure
requirements under Singapore Companies Act and Singapore
Exchange Listing Manual. You are strongly advised to refer
to respective legislations and regulations for the full list of
disclosures required.
You will find explanatory notes on the following in Appendix:
• F RS 24 Related Party Disclosures – Definitions & Disclosure
Requirements
• Other law and regulations relating to Directors
- Singapore Companies Act Cap. 50 Section 201
- Singapore Exchange Listing Manual Rule 852
INSTRUCTION
ON USE OF
THE PRACTICAL
GUIDE
The confirmation templates within the Practical Guide are to be
used without any changes or modifications and can be used for
financial periods ending on or after 31 March 2014.
Name of Company:
Financial Year / Period ended:
CONFIRMATION BY KEY MANAGEMENT PERSONNEL [FOR AUDITORS’ USE]
Name of Key Management Personnel:
Designation of Key Management Personnel:
1.I confirm that the compensation paid, payable or provided by the Company, or by an entity on
behalf of the Company, in exchange for services I have rendered to the Company during the
financial year/period, as set out in Section A on pages 2 to 4 of this confirmation, is complete
and accurate.
2.
I confirm that the information on other transactions during the financial year/period and
outstanding balances at the end of the financial year/period between the Company and myself,
my close family members and entities where I or any close family member control or jointly
control whether directly or indirectly, as set out in Section B on page 5 of this confirmation, is
complete and accurate.
Signed: _________________
1
Date: _________________
Obtaining Confirmations from KMP on Related Party Disclosures
SECTION A – KEY MANAGEMENT PERSONNEL COMPENSATION1 [FOR AUDITORS’ USE]
DESCRIPTION
Paid/Payable
by Company
[A]
Paid/Payable by an
entity2 on behalf of
the Company [B]
Total
(Company)
[A+B]
Paid/Payable by
Group entities
(delete, if not
applicable) [C]
Total (Group)
(delete, if not
applicable)
[A+B+C]
$
$
$
$
$
Remarks
Short-term
employee
benefits
Directors’ fees
Wages/salaries
Leave pay3
Bonuses/
commissions4
Allowances5
Other shortterm benefit –
please specify
Sub-total
1.
2.
3.
4.
5.
Compensation includes all forms of consideration paid, payable or provided by the Company, or by an entity on behalf of the Company, in exchange
for services rendered to the Company, including equity compensation benefits to which FRS 102 Share-based Payment applies. It also includes such
consideration paid by the Company on behalf of the parent (or other related companies) of the Company for services rendered to the Company. If a person
served in a key management capacity (including as a director) for any part of a financial period, disclosure is required of the person’s actual compensation for
the period that the person had served as key management personnel (or director).
Please specify name of entity and relationship of the entity to the Company.
Include cost of unutilised annual leave and sick leave that are carried forward and can be used in future periods if the current period’s entitlement is not used
in full (even if unused entitlement cannot be en-cashed).
Include bonuses, profit share, commissions and incentive payments to the extent determinable at the balance sheet date and accounted for in the financial
statements of the Company for the financial year/period.
Include non-monetary benefits (such as medical care, housing, cars and free or subsidised goods or services). The amount should be determined on the
basis of the cost to the Company and not the taxable value to the recipient. For example, the benefit of a durable asset such as a car or residential property
leased by the Company should be computed with reference to the rental costs to the Company. If the durable asset is owned by the Company, it would be
appropriate to show an estimation of the benefit in some narrative form, for example, with reference to amount that the employee would have to pay to
lease a similar vehicle or property. The part of the operating cost of the vehicle (including petrol, insurance, road tax, parking fees, repair and maintenance,
etc) attributable to the key management personnel’s private use should also be included.
2
SECTION A – KEY MANAGEMENT PERSONNEL COMPENSATION1 [FOR AUDITORS’ USE]
(CONTINUED)
DESCRIPTION
Paid/
Payable by
Company
[A]
Paid/Payable by an
entity2 on behalf
of the Company
[B]
Total
(Company)
[A+B]
Paid/Payable by
Group entities
(delete, if not
applicable) [C]
Total (Group)
(delete, if not
applicable)
[A+B+C]
$
$
$
$
$
Remarks
Postemployment
benefits
Company's
contribution to
provident fund,
pension fund
Other retirement
schemes
Sub-total
Sharebased
payment6
Share
options
Performance
shares
Othersharebased
payment
- please
specify
Sub-total
6. Include options or rights to shares in the Company, its subsidiaries, its Parent and other related companies if the compensation represents consideration for
services rendered to the Company. Amount declared is the expense for the year determined in accordance with IFRS 2/FRS 102 Share-based Payment. A
summary of share-based payment transactions, together with the bases of computing the amounts declared, should be attached.
3
Obtaining Confirmations from KMP on Related Party Disclosures
SECTION A – KEY MANAGEMENT PERSONNEL COMPENSATION1 [FOR AUDITORS’ USE]
(CONTINUED)
DESCRIPTION
Paid/Payable
by Company
[A]
Paid/Payable
by an entity2 on
behalf of the
Company [B]
Total
(Company)
[A+B]
Paid/Payable by
Group entities
(delete, if not
applicable) [C]
Total (Group)
(delete, if not
applicable)
[A+B+C]
$
$
$
$
$
Termination
benefits
Compensation for
loss of office
Others please specify
Sub-total
Other long-term
benefits7
Please specify
Sub-total
Grand Total
7. Examples: sabbatical leave, deferred bonus, other compensation payable more than 12 months after balance sheet date.
4
Remarks
SECTION B – TRANSACTIONS AND BALANCES WITH KEY MANAGEMENT PERSONNEL (OTHER
THAN COMPENSATION) [FOR AUDITORS’ USE]
During the financial year/period, transactions8 (other than key management personnel compensation)
have been entered into between the Company and the following related parties:
(a)
(b)
(c)
key management personnel9 of the Company or of a parent of the Company;
close family members of key management personnel; and
entities where any individual referred to in (a) or (b) above control or jointly control, whether
directly or indirectly.
Those transactions and the related outstanding balances as at the end of the financial year/period are
as follows:
No.
Name and relationship
of related party
Nature of
transaction
Amount
transacted
during the
financial
year/period
Outstanding
balance at
the financial
year/periodend, including
commitments
$
$
Terms and
conditions10
8. The following are examples of transactions that should be disclosed if they are with a related party:
(a) purchases or sales of goods (finished or unfinished);
(b) purchases or sales of property and other assets;
(c) rendering or receiving of services;
(d) leases;
(e) transfers of research and development;
(f) transfers under license agreements;
(g) transfers under finance arrangements (including loans and equity contributions in cash or in kind);
(h) provision of guarantees or collateral;
(i) commitments to do something if a particular event occurs or does not occur in the future, including executory contracts (recognised and unrecognised);
(j) settlement of liabilities on behalf of the entity or by the entity on behalf of another party; and
(k) professional or consulting fees received by a key management personnel personally, or paid to a firm in which the key management personnel is a proprietor,
owner, beneficiary or partner should be separately disclosed.
9. Key management personnel of an entity’s parent are to be included for the purpose of this template only if they have a role in directing the entity’s affairs.
10. Including whether they are secured, and the nature of the consideration to be provided in settlement; and details of any guarantees given or received.
5
Obtaining Confirmations from KMP on Related Party Disclosures
SECTION C - DIRECTORS’ INTERESTS IN THE COMPANY AND ITS RELATED CORPORATIONS
[FOR COMPANIES’ USE]
Name of Company:
Financial Year/ Period ended:
Name of Director:
In accordance with Section 201 (6)(g) or (6A)(h) of the Companies Act, I hereby give notice that I have
interest in the following shares11/debentures/rights/options etc of the Company, its Holding Company,
its subsidiaries and/or fellow subsidiaries, as registered in the names indicated below.
Name of
Company/
related
corporations
in which
shares etc
are held12
Name(s)
in which
registered12
- self, spouse,
children,
nominee, trust,
investor
No. of shares/debentures/rights/options etc held
Type
- Shares or
debentures
or rights or
options etc
Balance at
start of year
or date of
appointment
if later
Additions
during
the year
Disposed/
Exercised/
Cancelled
during the
year
Balance
at end
of year
Signed: _________________ Date: _________________
11.
Includes shares issued by virtue of the exercise of options to take up unissued shares of the Company, whether granted before or during the financial period
and the unissued shares of the Company under option as at the end of the financial period. The following information of the unissued shares are required to
be disclosed:
a) Number & related class of the shares.
b) Date of expiration.
c) Exercise price or basis upon which the option may be exercised and any participation rights.
12.A director’s interest in shares or debentures are deemed to include shares or debentures held by the director’s spouse or infant children, including step and
adopted children. Shares or debentures registered in the names of nominees in which a director has a beneficial interest should also be disclosed. Shares or
debentures registered in the names of directors, the beneficial interest of which is rested in another party should be disclosed together with details of the
beneficial shareholder(s). In addition, under Companies Act Section 7, a director is also deemed to have an interest in the shares/debentures of the Company
(Company A) where an investor Company (Company B) owns shares in the Company (Company A) and the director(s) (or with his associates) owns 20% of
the voting shares of the investor Company (Company B).
6
SECTION D – DIRECTORS’ INTERESTS IN CONTRACTS AND OTHER ARRANGEMENTS [FOR
COMPANIES’ USE]
Name of Company:
Financial Year/ Period ended:
Name of Director:
1. DIRECTOR’S INTERESTS IN CONTRACTS13
Pursuant to the provisions of the Singapore Companies Act and other than what is disclosed in Section
C, I further declare an interest in the following contracts entered into by the Company during the year/
period ended at the above date.
Names of the parties to the
contract (other than the
Company)
Nature of the contract
(including whether the
contract is subsisting or
exists)
Nature of the directors’
interest in the contract
1
2
3
I hereby declare that to the best of my knowledge and belief (except for the above), I do not and did not
have, in any way, whether directly or indirectly, an interest in any contracts with the Company which
subsisted at the end of the financial year/period or at any time during the year/period.
2. DIRECTOR’S INTERESTS IN OTHER ARRANGEMENTS
At the end of the financial year/period or at any time during that year, there did not subsist any
arrangements, to which the Company is a party, whereby I, as a director, might acquire benefits by
means of the acquisition of shares in, or debentures of, the Company or any other body corporate, other
than what is disclosed in Section C.
If yes, give particulars:
Signed: _________________ Date: _________________
13. Interests in contracts should not only refers to contracts entered into by the Company but also, its related corporation, a firm in which the director is a member
of, or a Company in which he has a substantial interest.
7
Obtaining Confirmations from KMP on Related Party Disclosures
SECTION E – DIRECTORS’ CONFIRMATION OF PARTICIPATION IN SHARE OPTION SCHEMES
AND/OR SHARES SCHEMES [FOR LISTED COMPANIES’ USE ONLY]
Name of Company:
Financial Year/ Period ended:
Name of Director:
Other than the share options disclosed in Section C, I confirm that the information14 as detailed below
is correct.
Name of
participant
Options granted
during financial
year/period
under review
(including terms)
Aggregate options
granted since
commencement
of scheme to end
of financial year/
period under review
Aggregate options
exercised since
commencement
of scheme to end
of financial year/
period under review
Aggregate options
outstanding as at
end of financial
year/period under
review
I confirm that there have been no changes to my interests declared in the table above within 21 days
after the year/period end15.
Signed: _________________ Date: _________________
14. In accordance with SGX Listing Manual Rule 852
15. In accordance with SGX Listing Manual 1207 (7).
8
APPENDIX
SINGAPORE FINANCIAL REPORTING STANDARD 24 RELATED PARTY DISCLOSURES (FRS 24)
Definition of related party
The definition of related party in FRS 24 has been simplified in 2010 so as to clarify its intended meaning
and to eliminate inconsistencies.
Under FRS 24, related parties of a Company include, but are not limited to, the following:
A. Person(s) Related to a Reporting Entity (RE)
1. The Person controls16, has joint control or has significant influence over the RE.
2. The Person is Key Management Personnel17 of the RE or a parent of the RE.
3. The Person is child, spouse/domestic partner or dependent of the Person in A1 and A2 above.
4. The Person is a child or dependent of the Person’s spouse/domestic partner.
B. Entity(s) Related to a RE
1. All parent, subsidiaries, fellow subsidiaries, joint ventures and associates of the RE.
2. All associates and joint ventures of the parent, subsidiaries or fellow subsidiaries of the RE.
3. All entities of which the RE is an associate or joint venture.
4. All entities which are joint ventures and associates of another entity (third entity) of which the RE is also a joint venture or associate of the third entity.
5. The entity is a post-employment benefit plan for the benefit of employees of either the
reporting entity or an entity related to the RE. If the RE is itself such a plan, the
sponsoring employers are also related to the RE.
6. The entity is controlled or jointly controlled by a person identified in A.
7. An entity in which a person who has control or joint control over the RE has significant
influence over the entity or is a member of the key management personnel of the entity or a parent of the entity.
16. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Joint control is the contractually agreed
sharing of control over an economic activity. Significant influence is the power to participate in the financial and operating policy decisions of an entity, but is
not control over those policies. Significant influence may be gained by share ownership, statue or agreement.
For financial periods beginning on or after 1 January 2014, the terms ‘control’, ‘joint control’ and ‘significant influence’ are defined in FRS 110 Consolidated
Financial Statements, FRS 111 Joint Arrangements and FRS 28 Investments in Associates and Joint Ventures respectively.
17. Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Company, directly
or indirectly, including any director (whether executive or otherwise) of the Company. Key management personnel of an entity’s parents are to be included for
the purpose of this template only if they have a role in directing the entity’s affairs.
9
SINGAPORE FINANCIAL REPORTING STANDARD 24 RELATED PARTY DISCLOSURES (FRS 24)
(Continued)
Related party disclosures
In general, FRS 24 requires a reporting entity to disclose:
(a) Parent, ultimate controlling party (if different from parent) and subsidiaries.
(b) If neither the Parent nor the ultimate controlling party produces consolidated financial
statements available for public use, the name of the next most senior Parent that does.
(c) Key management personnel compensation in total and for each of the following categories:
i)
Short-term employee benefits;
ii)
Post-employment benefits;
iii) Other long-term employee benefits;
iv) Termination benefits; and
v)
Share-based payment.
(d) If the RE has related party transactions during the period covered by the financial statements,
to disclose:
i)
Nature of the related party relationship;
ii)
Information about those transactions and amount of the transactions;
iii) Outstanding balances, including commitments;
iv)
The terms and conditions, including whether they are secured, and the nature of the
consideration to be provided in settlement;
v)
vi) Provisions for doubtful debts related to the amount of outstanding balances; and
vii)The expense recognised during the period in respect of bad or doubtful debts due from related
parties.
The details of any guarantees given or received;
(e) The disclosures in (d) are required to be made separately for each of the following categories:
i)
The parent;
ii)
Entities with joint control or significant influence over, the entity;
iii)Subsidiaries;
iv)Associates;
10
SINGAPORE FINANCIAL REPORTING STANDARD 24 RELATED PARTY DISCLOSURES (FRS 24)
(Continued)
v)
Joint ventures in which the entity is a venturer;
vi) Key management personnel17 of the entity or its parent; and
vii) Other related parties.
(f)Participation by a parent or subsidiary in a defined benefit plan that shares risks between group
entities is a transaction between related parties.
(g)
Disclosures that related party transactions were made on terms equivalent to those that
prevail in arm’s length transactions are made only if such terms can be substantiated.
(h)
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 statement of the entity.
SINGAPORE COMPANIES ACT (CA) AND SINGAPORE EXCHANGE LISTING MANUAL (SGX LM)
Disclosure requirements under both CA and SGX LM are the responsibility of the Directors and the
Company.
Singapore CA (Cap. 50) Section 201 requires the directors to state the following details in the directors’
report attached to the financial statements:
(a)Interests in shares in, or debentures18 of, the Company, its Holding Company, its subsidiaries and/or fellow subsidiaries and interested parties in the group at the beginning and end of the period [CA 201(6)(g) & CA 201(6A)(h)]; (b)
Rights, options or any other arrangements at the end of or during the period to enable
directors to acquire the shares or debentures of the Company, its Holding Company, its
subsidiaries and/or fellow subsidiaries and interested parties in the group [CA 201(6)(f)
& CA 201(6A)(g)]; and
(c)Contracts to which the director is a party or under which the director is entitled to a benefit, being contracts under which the director has a right to or entitled to exercise control over the call or to make delivery of shares and debentures or trusts or settlements [CA 201 (8)].
In addition, both CA Section 201(12) and SGX LM Rule 852 requires the disclosure on directors’
entitlement to share options.
17. K
ey management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Company, directly
or indirectly, including any director (whether executive or otherwise) of the Company. Key management personnel of an entity’s parents are to be included for
the purpose of this template only if they have a role in directing the entity’s affairs.
18. D
ebentures includes debenture stock, bonds, notes and any other securities of a corporation (e.g. options) whether constituting a charge on the assets of the
corporation or not but does not include —
(a) a cheque, letter of credit, order for the payment of money or bill of exchange;
(b) subject to the regulations, a promissory note having a face value of not less than $100,000 and having a maturity period of not more than 12 months;
(c) for the purposes of the application of this definition to a provision of this Act in respect of which any regulations made thereunder provide that the word
“debenture” does not include a prescribed document or a document included in a prescribed class of documents, that document or a document included
in that class of documents, as the case may be.
11
About ISCA Technical Standards Development and Advisory
The Technical Standards Development and Advisory (TSDA) team is part of the Technical Knowledge
Centre and Quality Assurance division of the Institute of Singapore Chartered Accountants (ISCA). It is
committed to supporting the Institute in advancing and promoting technical developments within the
profession as part of the effort to transform Singapore into a leading global accountancy hub by 2020.
ISCA TSDA engages external stakeholders in soliciting meaningful feedback on accounting and auditing
related issues to develop a consistent approach to addressing industry issues identified. It also prescribes
auditing and assurance standards that are closely aligned to international best practices, champions
thought leadership initiatives with key stakeholders and drives projects in collaboration with various
ISCA technical committees.
It actively engages international standard setters and strives to be an advocate of matters pertinent to
the development of Singapore’s accountancy profession. Furthermore, it aims to cultivate a mindset
change and raises awareness of new and revised standards through the publication of articles authored
by the team.
Additionally, ISCA TSDA seeks to empower members and the profession at large to achieve their
aspirations by equipping them with relevant technical expertise and this is achieved through the
development of a range of resources that that they can tap on.
Knowledge sharing with the accounting community is facilitated through a variety of print and
online channels including the sharing of regular updates and thought leadership articles via in-house
publications like the journal, “IS Chartered Accountant”, the E-newsletter, “ISCA Weekly”, and various
online knowledge centres and a technical forum. Seminars and workshops are regularly organised and
ISCA TSDA also provides value added technical clarification services to assist the profession in resolving
accounting, auditing and ethics related issues.
Disclaimer
This document contains general information only and ISCA is not, by means of this document, rendering
any professional advice or services. This document is not a substitute for such professional advice or
services, nor should it be used as a basis for any decision or action that may affect your business. Before
making any decision or taking any action that may affect your business, you should consult a professional
advisor. Whilst every care has been taken in compiling this document, ISCA makes no representations
or warranty (expressed or implied) about the accuracy, suitability, reliability or completeness of the
information for any purpose. ISCA, its employees or agents accept no liability to any party for any loss,
damage or costs howsoever arising, whether directly or indirectly from any action or decision taken (or
not taken) as a result of any person relying on or otherwise using this document or arising from any
omission from it.
12
Institute of Singapore Chartered Accountants
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Tel: (65) 6749 8060 Fax: (65) 6749 8061