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Section 33

Related Party Disclosures

Scope of this section

  1. 1 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.

Related party defined

  1. 2 A related party is a person or entity that is related to the entity that is preparing its financial statements (the reporting entity):
    1. a person or a close member of that person’s family is related to a reporting entity if that person:
      1. is a member of the key management personnel of the reporting entity or of a parent of the reporting entity;
      2. has control or joint control over the reporting entity; or
      3. has significant influence over the reporting entity.
    2. an entity is related to a reporting entity if any of the following conditions applies:
      1. 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).
      2. 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).
      3. both entities are joint ventures of the same third entity.
      4. one entity is a joint venture of a third entity and the other entity is an 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 reporting entity. If the reporting entity is itself such a plan, the sponsoring employers are also related to the reporting entity.
      6. the entity is controlled or jointly controlled by a person identified in (a).
      7. 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 entity.
      8. a person identified in (a)(ii) 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).
  1. 3 In considering each possible related party relationship, an entity shall assess the substance of the relationship and not merely the legal form.
  1. 4 In the context of this Standard, the following are not necessarily related parties:
    1. two entities simply because they have a director or other member of key management personnel in common;
    2. two venturers simply because they share joint control over a joint venture;
    3. any of the following simply by virtue of their normal dealings with an entity (even though they may affect the freedom of action of an entity or participate in its decision-making process):
      1. providers of finance;
      2. trade unions;
      3. public utilities; or
      4. government departments and agencies.
    4. a customer, supplier, franchisor, distributor or general agent with whom an entity transacts a significant volume of business, merely by virtue of the resulting economic dependence.


Disclosure of parent-subsidiary relationships

  1. 5 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 any) shall also be disclosed.

Disclosure of key management personnel compensation

  1. 6 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 (for example, by its parent or by a shareholder), in exchange for services rendered to the entity. It also includes such consideration paid on behalf of a parent of the entity in respect of goods or services provided to the entity.
  2. 7 An entity shall disclose key management personnel compensation in total.

Disclosure of related party transactions

  1. 8 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:
    1. transactions between an entity and its principal owner(s);
    2. transactions between an entity and another entity when both entities are under the common control of a single entity or person; and
    3. transactions in which an entity or person that controls the reporting entity incurs expenses directly that otherwise would have been borne by the reporting entity.
  1. 9 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. Those disclosure requirements are in addition to the requirements in paragraph 33.7 to disclose key management personnel compensation. At a minimum, disclosures shall include:
    1. the amount of the transactions;
    2. the amount of outstanding balances and:
      1. their terms and conditions, including whether they are secured and the nature of the consideration to be provided in settlement; and
      2. details of any guarantees given or received.
    3. provisions for uncollectable receivables related to the amount of outstanding balances; and
    4. the expense recognised 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.

  1. 10 An entity shall make the disclosures required by paragraph 33.9 separately for each of the following categories:
    1. entities with control, joint control or significant influence over the entity;
    2. entities over which the entity has control, joint control or significant influence;
    3. key management personnel of the entity or its parent (in the aggregate); and
    4. other related parties.
  1. 11 An entity is exempt from the disclosure requirements of paragraph 33.9 in relation to:
    1. a state (a national, regional or local government) that has control, joint control or significant influence over the reporting entity; and
    2. another entity that is a related party because the same state has control, joint control or significant influence over both the reporting entity and the other entity.

However, the entity must still disclose a parent-subsidiary relationship as required by paragraph 33.5.

  1. 12 The following are examples of transactions that shall be disclosed if they are with a related party:
    1. purchases or sales of goods (finished or unfinished);
    2. purchases or sales of property and other assets;
    3. rendering or receiving of services;
    4. leases;
    5. transfers of research and development;
    6. transfers under licence agreements;
    7. transfers under finance arrangements (including loans and equity contributions in cash or in kind);
    8. provision of guarantees or collateral;
    9. settlement of liabilities on behalf of the entity or by the entity on behalf of another party; and
    10. participation by a parent or subsidiary in a defined benefit plan that shares risks between group entities.
  1. 13 An entity shall not state that related party transactions were made on terms equivalent to those that prevail in arm’s length transactions unless such terms can be substantiated.
  1. 14 An entity may disclose items of a similar nature in the aggregate except when separate disclosure is necessary for an understanding of the effects of related party transactions on the financial statements of the entity.