What disclosures are required for related party transactions under IAS 24?

Core rule IAS 24 Related Party Disclosures requires entities to identify and disclose all transactions with related parties (including key management personnel, associates, joint ventures, and entities under common control) in sufficient detail to allow users to understand their nature, extent, and potential effect on the financial statements, unless explicitly exempted (IAS 24.1). How it works - Related party identification: An entity must first determine whether counterparties constitute related parties under IAS 24.9. Related parties include: (i) entities with significant influence or joint control; (ii) key management personnel (KMP) and their close family members; (iii) post-employment benefit plans for the entity's employees; and (iv) entities controlled, jointly controlled, or significantly influenced by KMP (IAS 24.9). - Transaction recognition and measurement: Related party transactions are recognised and measured using the same principles as arm's-length transactions. However, the commercial substance must be assessed; if a transaction would not have occurred on comparable terms with an unrelated party, the entity must disclose this fact (IAS 24.21). No separate measurement requirement exists—use existing IFRS standards (IFRS 15 for revenue, IFRS 9 for financial instruments, etc.). - Disclosure threshold and scope: Exemptions apply only to state-controlled entities in defined circumstances and certain intra-group transactions (IAS 24.11 and 24.26). For all other entities, disclosure is required for: (i) the amount of transactions; (ii) the outstanding ba

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?

lances; (iii) provisions for doubtful debts; and (iv) bad debt write-offs (IAS 24.18(a)–(d)). Key management personnel compensation must be disclosed in total and disaggregated by short-term benefits, post-employment benefits, termination benefits, and share-based payments (IAS 24.17). - Presentation of related party information: Disclosures must be presented in a manner that clearly identifies the nature and extent of related party relationships and transactions. Aggregate disclosure by related party type is permitted if individual transactions are immaterial, but must disclose the parent entity and the ultimate controlling party (IAS 24.13 and 24.17). - Key management personnel compensation detail: Aggregate compensation must separately state: short-term employee benefits (salaries, bonuses, paid leave); post-employment benefits (pensions, gratuities); termination benefits (severance); and share-based payments (options, restricted stock units) (IAS 24.17). This is mandatory for all entities, not optional. - Consolidation adjustment and intra-group transactions: In consolidated financial statements, related party transactions between group entities are eliminated; however, the parent must still disclose its own transactions with subsidiaries, associates, and joint ventures in its separate financial statements (IAS 24.25). Intra-group transactions in consolidated statements require disclosure only if material or if the exemption in IAS 24.11 does not apply. Practical example A manufacturing company (Parent Co.) with a CFO (key management) and a 40%-owned associate

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?

(Supplier Inc.) enters into the following transactions in Year 1: - Parent Co. sells inventory to Supplier Inc. for €5.2 million at a 12% markup (above normal 8% margin); cost of sales €4.6 million. - Supplier Inc. provides raw materials to Parent Co. for €3.8 million at list price (no discount, whereas unrelated suppliers offer 5–7% discounts). - The CFO receives a salary of €450,000, a performance bonus of €150,000, and a defined contribution pension contribution of €67,500. - A related party loan from a family trust to Parent Co. remains outstanding at €2.1 million with 4% annual interest (below market rate of 6.5%). Journal entries in Parent Co. for Year 1: | Account | Dr (€) | Cr (€) | |---|---|---| | Cash (from Supplier Inc.) | 5,200,000 | | | Revenue (sale to related party) | | 5,200,000 | | Cost of Sales | 4,600,000 | | | Inventory | | 4,600,000 | | Raw Materials Expense | 3,800,000 | | | Trade Payable (Supplier Inc.) | | 3,800,000 | | Interest Expense | 84,000 | | | Related Party Loan Payable | | 84,000 | Disclosure note requirement (IAS 24.18–19): | Transaction | Amount (€) | Disclosure Requirement | |---|---|---| | Sales to Supplier Inc. | 5.2m | Nature, amount, terms (unfavourable markup disclosed); outstanding receivable | | Purchases from Supplier Inc. | 3.8m | Nature, amount, terms (no discount vs. market practice); outstanding payable | | CFO compensation | 667.5k | Short-term benefits €600k; post-employment €67.5k | | Related party loan | 2.1m outstanding | Principal, interest rate 4% (below market 6.5%), terms, repayment schedule | Common pitfal

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?

ls - Misidentifying related parties: Practitioners often fail to identify indirect relationships or fail to assess whether an entity has significant influence (≥20% equity stake) over another entity. The definition extends beyond shareholders to include KMP family members and entities they control. Audit trap: examiners test whether post-employment benefit plans were correctly identified as related parties (IAS 24.9(b)(iii)). - Omitting KMP compensation components: Failing to disaggregate key management compensation into the four required categories (short-term, post-employment, termination, share-based) is a frequent error. Some entities disclose aggregate only; IAS 24.17 requires disaggregation. This is particularly material in exam scenarios involving executive share schemes. - Inadequate disclosure of transaction terms: Simply stating "€5m sale to related party" is insufficient. IAS 24.21 requires disclosure of whether the transaction terms differ from arm's-length terms and, if so, how and why. Many audits flag entities that fail to note unfavourable pricing or extended payment terms. Key paragraphs to know - IAS 24.9 — definition of related party (entities, KMP, family members) - IAS 24.17 — mandatory disclosure of KMP compensation (disaggregated) - IAS 24.18 — required disclosures for related party transactions (nature, amount, outstanding balances, bad debts) - IAS 24.21 — disclosure of non-arm's-length terms and circumstances - IAS 24.25 — exemptions for intra-group transactions in consolidated statements - IAS 24.26 — exemption for state-controlled entit

IAS 24 Related Party Disclosures

IAS 24 Related — Core Rule

IAS 24 Related Party Disclosures requires entities to identify and disclose all transactions with related parties (including key management personnel, associates, joint ventures, and entities under common control) in sufficient detail to allow users to understand their nature, extent, and potential effect on the financial statements, unless explicitly exempted (IAS 24.1).

IAS 24 Related Party Disclosures

IAS 24 Related — Core Rule

How IAS 24 Related Works