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Chetan Suri

A related party shall be a person or entity that is related to the entity which is preparing its financial statements (referred to as the ‘reporting entity’): (a) A person or a close member of that person's family is related to a reporting entity if that person: <ol> <li>has control or joint control over the reporting entity;</li> <li>has significant influence over the reporting entity; or</li> <li>is a member of the key management personnel of the reporting entity or of a parent of the reporting entity.</li> </ol> (b) An entity is related to a reporting entity if any of the following conditions applies: <ol> <li>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).</li> <li>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).</li> <li>Both entities are joint ventures of the same third party.</li> <li>One entity is a joint venture of a third entity and the other entity is an associate of the third entity.</li> <li>The entity is a post-employment defined 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.</li> <li>The entity is controlled or jointly controlled by a person identified in (a).</li> <li>A person identified in (a)(1.) 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).</li> <li>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.</li> </ol> What is a Related Party Transaction? 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.   (c) Explanations to some points: <ol> <li>Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.</li> <li>Joint control is the contractually agreed sharing of control over an economic activity.</li> <li>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.</li> <li>Significant influence is the power to participate in the financial and operating policy decisions of an entitybut is not control over those policies. Significant influence may be gained by share ownership, statute or agreement.</li> <li>Close members of the family of a person are those family members who may be expected to influence, or be influenced by, that person in their dealings with the entity and include: (a) that person’s children and spouse or domestic partner; (b) children of that person’s spouse or domestic partner; and (c) dependants of that person or that person’s spouse or domestic partner.</li> </ol>   Two areas shall always be disclosed in Financial Statements, when applicable: 1. Relationships between parents and subsidiaries. Regardless of whether there have been transactions between a parent and a subsidiary, an entity must 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 must also be disclosed.   2. Managementcompensation. Disclose key management personnel compensation in total and for each of the following categories: <ul> <li>short-term employee benefits; post-employment benefits; other long-term benefits; termination benefits; share-based payment benefits.</li> </ul>   (d) The following are deemed not to be related: <ol> <li>two entities simply because they have a director or key manager in common; </li> <li>two ventures who share joint control over a joint venture; </li> <li>providers of finance, trade unions, public utilities, and departments and agencies of a government that does not control, jointly control or significantly influence the reporting entity, 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); </li> <li>a single customer, supplier, franchiser, distributor, or general agent with whom an entity transacts a significant volume of business merely by virtue of the resulting economic dependence.</li> </ol>   While Summarizing the whole: A related party is a person or an entity that is related to the reporting entity:  <ul> <li>A person or a close member of that person’s family is related to a reporting entity if that person has control, joint control, or significant influence over the entity or is a member of its key management personnel.</li> <li>An entity is related to a reporting entity if, among other circumstances, it is a parent, subsidiary, fellow subsidiary, associate, or joint venture of the reporting entity, or it is controlled, jointly controlled, or significantly influenced or managed by a person who is a related party. </li> </ul> A related party shall be a person or entity that is related to the entity which is preparing its financial statements (referred to as the ‘reporting entity’): (a) A person or a close member of that person's family is related to a reporting entity if that person: <ol> <li>has control or joint control over the reporting entity;</li> <li>has significant influence over the reporting entity; or</li> <li>is a member of the key management personnel of the reporting entity or of a parent of the reporting entity.</li> </ol> (b) An entity is related to a reporting entity if any of the following conditions applies: <ol> <li>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).</li> <li>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).</li> <li>Both entities are joint ventures of the same third party.</li> <li>One entity is a joint venture of a third entity and the other entity is an associate of the third entity.</li> <li>The entity is a post-employment defined 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.</li> <li>The entity is controlled or jointly controlled by a person identified in (a).</li> <li>A person identified in (a)(1.) 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).</li> <li>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.</li> </ol> What is a Related Party Transaction? 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.   (c) Explanations to some points: <ol> <li>Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.</li> <li>Joint control is the contractually agreed sharing of control over an economic activity.</li> <li>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.</li> <li>Significant influence is the power to participate in the financial and operating policy decisions of an entitybut is not control over those policies. Significant influence may be gained by share ownership, statute or agreement.</li> <li>Close members of the family of a person are those family members who may be expected to influence, or be influenced by, that person in their dealings with the entity and include: (a) that person’s children and spouse or domestic partner; (b) children of that person’s spouse or domestic partner; and (c) dependants of that person or that person’s spouse or domestic partner.</li> </ol>   Two areas shall always be disclosed in Financial Statements, when applicable: 1. Relationships between parents and subsidiaries. Regardless of whether there have been transactions between a parent and a subsidiary, an entity must 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 must also be disclosed.   2. Managementcompensation. Disclose key management personnel compensation in total and for each of the following categories: <ul> <li>short-term employee benefits; post-employment benefits; other long-term benefits; termination benefits; share-based payment benefits.</li> </ul>   (d) The following are deemed not to be related: <ol> <li>two entities simply because they have a director or key manager in common; </li> <li>two ventures who share joint control over a joint venture; </li> <li>providers of finance, trade unions, public utilities, and departments and agencies of a government that does not control, jointly control or significantly influence the reporting entity, 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); </li> <li>a single customer, supplier, franchiser, distributor, or general agent with whom an entity transacts a significant volume of business merely by virtue of the resulting economic dependence.</li> </ol> While Summarizing the whole: A related party is a person or an entity that is related to the reporting entity:  <ul> <li>A person or a close member of that person’s family is related to a reporting entity if that person has control, joint control, or significant influence over the entity or is a member of its key management personnel.</li> <li>An entity is related to a reporting entity if, among other circumstances, it is a parent, subsidiary, fellow subsidiary, associate, or joint venture of the reporting entity, or it is controlled, jointly controlled, or significantly influenced or managed by a person who is a related party. </li> </ul>

IDENTIFICATION OF A RELATED PARTY- IAS 24

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