PwC
Related Party
Transactions
Sujeewa Mudalige
TRANSFORM
Changing business by changing
behaviour
Overview of session
1. Introduction
2. Recognition
3. Disclosure
4. New developments
TRANSFORM
2
PwC
PwC
Related Party
Disclosures
Introduction
TRANSFORM
Changing business by changing
behaviour
Scope of IAS 24 / LKAS 24
• Parties are related if one party can control or exercise
significant influence over the other
• IAS 24 covers those parties which are related and details a
number of exclusions
• Disclosure is required for:
– Upwards and downwards control relationships
– Details of the transactions
TRANSFORM
4
PwC
PwC
Related Party
Disclosures
Recognition
TRANSFORM
Changing business by changing
behaviour
Determining related parties
Control
Determining
Related
Parties





Parents
Subsidiaries
Fellow subsidiaries
Joint ventures
Other entities controlled by owners or
key management
Significant influence
Key management
personnel
TRANSFORM
6
PwC
Examples of related party
transactions
 Sales and purchases of good and services
 Balances arising as a result at the Balance Sheet date
 Loans, commitments and contingencies
 Transactions with directors
 Bank loans and collateral
 Agency arrangements
 Share capital transactions
TRANSFORM
7
PwC
Exclusions
Providers of finance
Trade Unions
Public utilities
Government departments and agencies
Single suppliers / customers / franchises / distributors unless a
specific relationship exists
Entities with a director in common unless that director has the
ability to direct or significantly influence
TRANSFORM
8
PwC
Exemptions
 Stand alone financial statements of a parent if consolidated
statements are available
 Financial statements of a wholly owned subsidiary if parent
incorporated in the same country and providing financial
statements
 Intra-group transactions that have been eliminated on
consolidation
 State controlled entities
TRANSFORM
9
PwC
Related parties for only
part of the year
Company A acquires 25% of Company B,
regular supplier, on 1/9/20XX for which it
equity accounts.
During the year ended 31/12/20XX
Company B makes sales to A of 2,000.
The total sales till 1/9/20XX were 1,100.
The companies are related from 1/9/20XX
and 900 should be disclosed as a related
party transaction.
TRANSFORM
10
PwC
PwC
Related Party
Disclosures
Measurement
TRANSFORM
Changing business by changing
behaviour
Measuring transactions
Cost
Arm’s length
Cost plus
Methods
Resale price
TRANSFORM
Free of charge
12
PwC
PwC
Related Party
Disclosures
Disclosure
TRANSFORM
Changing business by changing
behaviour
Disclosures
 Nature of the relationships
 Types of transaction
 Volume and value of the transaction
 Pricing policies
 Balances at year end
TRANSFORM
14
PwC
Improvements project (1)
• Related party definition clarified to include
– Parties with joint control over entity
– Joint ventures
– Post-employment benefit plan
• Significant influence definition - conformed to IAS / LKAS 28
• Wholly owned subsidiary – exemption no longer limited to
parent in same country
• State-controlled entities no longer exempt
TRANSFORM
15
PwC
Improvements project (2)
• No longer sufficient to disclose proportions of transactions /
balances
– must disclose full amounts
• Additional disclosures by category of related party :
– Terms and conditions (security / consideration)
– Guarantees given / received
– Provisions for doubtful debts (incl P/L expense)
– Settlement of liabilities on behalf of entity
• Pricing policies / management compensation cost not required
TRANSFORM
16
PwC