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Participation by a parent or subsidiary in a defined benefit plan that shares risks between group entities is a related-parties transaction in accordance with a
specific provision of paragraph 22 of IAS 24 (revised 2009).
According to IAS 24 (revised 2009), paragraph 13, an entity should disclose
• Relationships between parents and subsidiaries regardless of whether there have been any transactions between them.
• The name of the entity’s 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 shall also be disclosed.
PRACTICAL INSIGHT
The Standard (IAS 24 [revised 2009], paragraph 16) clarifies the meaning of “next most senior parent”—it refers to the first parent in the group above the
immediate parent that produces consolidated financial statements available for public use.
According to IAS 24 (revised 2009), paragraph 17, an entity should disclose “key management personnel” compensation in total and for each of these categories:
1. Short-term employee benefits
2. Postemployment benefits
3. Other long-term benefits
4. Termination benefits
5. Share-based payments
IAS 24 (revised 2009), paragraph 18, states that if there have been transactions between related parties, an entity should disclose the nature of the related-party
relationship as well as information about the transactions and outstanding balances necessary for an understanding of the potential effect of the relationship on the
financial statements. At a minimum, disclosures shall include
• The amount of the transactions
• The amount of outstanding balances:
• Their terms and conditions
• Whether they are secured or unsecured
• The nature of the settlement consideration
• Details of guarantees given or received
• Provisions for doubtful debts against balances outstanding
• Provisions for doubtful debts recognized as an expense
According to IAS 24 (revised 2009), paragraph 19, these disclosures are required to be disclosed separately for each of these categories of related party:
• Parent
• Entities with joint control or significant influence over the entity
• Subsidiaries
• Associates
• Joint ventures in which the entity is a venturer
• Key management personnel of the entity or its parent
• Other related parties
IAS 24 (revised 2009), paragraph 24, states that items of a similar nature may be disclosed in aggregate except when separate disclosure is necessary for an
understanding of the effects of related-party transactions on the financial statements of the entity.
Government-Related Entities
In accordance with the latest revision to IAS 24, effective for periods beginning on or after January 1, 2011, a reporting entity is exempt from the disclosure
requirements of paragraph 18 of IAS 24 (revised 2009) in terms of related-party transactions and outstanding balances, and commitments.
IAS 24 (revised 2009), paragraph 26, prescribes the following alternative disclosure requirements in case an exemption relating to government-related entities is
applied by a reporting entity:
• The name of the government and the nature of its relationship with the reporting entity (i.e., control, joint control, or significant influence).
• The nature and amount of each individually significant transaction.
• For other transactions, that are collectively significant, a qualitative or quantitative indication of their extent.
According to IAS 24 (revised 2009), paragraph 27, in assessing the level of detail to be disclosed in accordance with the previously mentioned requirement of the
Standard, the reporting entity should evaluate factors such as “closeness of the relationship” and “other factors” such as whether it is
• Significant in terms of size
• Carried out on nonmarket terms
• Outside normal day-to-day business operations, such as purchase and sale of businesses
• Disclosed to regulatory or supervisory authorities
• Reported to senior management
• Subject to shareholder approval
CASE STUDY 4