How do you assess whether a 15% equity stake (below 20% threshold) still creates significant influence for IAS 24 purposes, and what evidence must you document?

When related party transactions have occurred during the reporting period, the entity must disclose the nature of the relationship and provide information about those transactions and outstanding balances necessary for users to understand the potential effect on the financial statements (IAS 24.18). At a minimum, disclosures must include: - The amount of the transactions - The amount of outstanding balances, including commitments, with their terms, conditions, and any security arrangements - Provisions for doubtful debts related to outstanding balances - The expense recognised during the period for bad or doubtful debts from related parties Disclosures must be made separately for each category of related party — parent, entities with joint control or significant influence, subsidiaries, associates, joint ventures, and KMP of the entity or its parent (IAS 24.19).

When consolidating, must you disclose related party transactions with joint ventures in the consolidated statement if they are eliminated, and how does this differ from the parent's separate financial statements?

A wide range of transactions must be disclosed when they involve related parties, including: - Purchases or sales of goods (finished or unfinished) and property - Rendering or receiving of services and leases - Transfers of research and development, licence agreements, and finance arrangements (including loans) - Provision of guarantees or collateral - Commitments contingent on future events, including executory contracts (IAS 24.21) Key management personnel compensation must be disclosed in total and broken down into: short-term employee benefits, post-employment benefits, other long-term benefits, termination benefits, and share-based payment (IAS 24.17). Where KMP services are obtained from a separate management entity, the amounts paid to that management entity for those services must also be disclosed (IAS 24.18A).

How should you treat an implicit related party arrangement—e.g., a purchase from a supplier owned by a director's spouse—if no written contract exists and the transaction was not formally approved by the board?

- Claiming arm's length without evidence: Stating that a related party transaction was conducted on arm's length terms is only permissible if that assertion can be substantiated (IAS 24.23). Unsubstantiated claims expose financial statements to challenge. - Aggregating when separation is needed: Items of a similar nature may be aggregated, but only when separate disclosure is not necessary to understand the effect on the financial statements (IAS 24.24). Over-aggregation obscures material information. - Missing the government exemption conditions: State-controlled entities may apply a partial exemption from the full disclosure requirements for transactions with the government or other government-related entities (IAS 24.25). However, when this exemption is used, the entity must still disclose the name of the government, the nature of the relationship, and sufficient detail about individually or collectively significant transactions (IAS 24.26). Applying the exemption without meeting those residual requirements is non-compliant. - Forgetting no-transaction relationships: Preparers sometimes focus only on transactions and overlook that control relationships require disclosure even when nothing has been transacted (IAS 24.14). - IAS 24.13 — Requires disclosure of parent-subsidiary relationships and identification of the ultimate controlling party, irrespective of whether transactions have occurred. - IAS 24.17 — Mandates disclosure of total KMP compensation disaggregated into five specified categories. - IAS 24.18 — Sets the core obligation to disclose the nature and details of related party transactions and outstanding balances whenever such transactions have occurred. - IAS 24.19 — Requires disclosures to be presented separately for each category of related party. - IAS 24.21 — Lists the types of transactions that trigger disclosure when entered into with a related party, from goods and services to guarantees and executory contracts. - IAS 24.23 — Restricts arm's length assertions to situations where the terms can actually be substantiated.

IAS 24 Related Party Disclosures

IAS 24 Related Party Disclosures — Core Rule

IAS 24 Related Party Disclosures requires entities to identify and disclose all related party relationships, transactions, and outstanding balances — including commitments — in sufficient detail for users to understand their potential effect on the financial statements (IAS 24.3). The standard applies in consolidated and separate financial statements alike, covering parents, investors with joint control, and entities with significant influence over an investee. Crucially, disclosure of control relationships is required even when no transactions have taken place (IAS 24.14).

How IAS 24 Related Party Disclosures Works

Before any disclosure can be prepared, an entity must determine who qualifies as a related party. The standard applies to relationships involving control, joint control, or significant influence, as well as to key management personnel (KMP) and their close family members. Substance governs over legal form — an entity assesses the nature of each relationship, not merely its contractual label (IAS 24.10).

Parent-subsidiary relationships must always be disclosed, regardless of whether transactions have occurred between them. An entity must name its parent and, where different, its ultimate controlling party (IAS 24.13). This requirement sits alongside — and does not replace — the disclosure requirements in IAS 27 and IFRS 12 (IAS 24.15).

What to disclose for transactions

When related party transactions have occurred during the reporting period, the entity must disclose the nature of the relationship and provide information about those transactions and outstanding balances necessary for users to understand the potential effect on the financial statements (IAS 24.18). At a minimum, disclosures must include:

The amount of the transactions

The amount of outstanding balances, including commitments, with their terms, conditions, and any security arrangements
Provisions for doubtful debts related to outstanding balances
The expense recognised during the period for bad or doubtful debts from related parties

Disclosures must be made separately for each category of related party — parent, entities with joint control or significant influence, subsidiaries, associates, joint ventures, and KMP of the entity or its parent (IAS 24.19).

Types of transactions requiring disclosure

A wide range of transactions must be disclosed when they involve related parties, including:

Purchases or sales of goods (finished or unfinished) and property

Rendering or receiving of services and leases
Transfers of research and development, licence agreements, and finance arrangements (including loans)
Provision of guarantees or collateral
Commitments contingent on future events, including executory contracts (IAS 24.21)

KMP compensation

Key management personnel compensation must be disclosed in total and broken down into: short-term employee benefits, post-employment benefits, other long-term benefits, termination benefits, and share-based payment (IAS 24.17). Where KMP services are obtained from a separate management entity, the amounts paid to that management entity for those services must also be disclosed (IAS 24.18A).

IAS 24 Related Party Disclosures — Common Pitfalls

Claiming arm's length without evidence: Stating that a related party transaction was conducted on arm's length terms is only permissible if that assertion can be substantiated (IAS 24.23). Unsubstantiated claims expose financial statements to challenge.

Aggregating when separation is needed: Items of a similar nature may be aggregated, but only when separate disclosure is not necessary to understand the effect on the financial statements (IAS 24.24). Over-aggregation obscures material information.
Missing the government exemption conditions: State-controlled entities may apply a partial exemption from the full disclosure requirements for transactions with the government or other government-related entities (IAS 24.25). However, when this exemption is used, the entity must still disclose the name of the government, the nature of the relationship, and sufficient detail about individually or collectively significant transactions (IAS 24.26). Applying the exemption without meeting those residual requirements is non-compliant.
Forgetting no-transaction relationships: Preparers sometimes focus only on transactions and overlook that control relationships require disclosure even when nothing has been transacted (IAS 24.14).

IAS 24 Related Party Disclosures — Key Paragraphs

IAS 24.13 — Requires disclosure of parent-subsidiary relationships and identification of the ultimate controlling party, irrespective of whether transactions have occurred.
IAS 24.17 — Mandates disclosure of total KMP compensation disaggregated into five specified categories.
IAS 24.18 — Sets the core obligation to disclose the nature and details of related party transactions and outstanding balances whenever such transactions have occurred.
IAS 24.19 — Requires disclosures to be presented separately for each category of related party.
IAS 24.21 — Lists the types of transactions that trigger disclosure when entered into with a related party, from goods and services to guarantees and executory contracts.
IAS 24.23 — Restricts arm's length assertions to situations where the terms can actually be substantiated.