Related party disclosures - Company Reporting

Key Management Personnel CompensationCR Common PracticesRelated Party DisclosuresKey management personnel are defined by IAS 24 as those persons having authority and responsibility for planning,directing and controlling of the activities of the entity, directly or indirectly, including any director whether executive orotherwise of that entity (para 9). All companies in our sample have a group of individuals at their head which meet thisdefinition but not all clearly identify such individuals as related parties using IAS 24 terminology. Of the companies inour sample 20 identify the compensation paid to key management personnel within their related parties note with suchcompanies including BAE Systems, E.on and Royal DSM. A further three companies either include the information in aseparate note referenced within the related parties note or use IAS 24 specific terminology by identifying theinformation given as key management personnel compensation. These companies are BG and Eni which both use thekey management personnel terminology and BBVA which gives the information in a referenced note. For a further sixcompanies information of the type required by IAS 24 is given in a note to the accounts but the link to related partyinformation is less clear. These companies include BMW, ASML, Assa Abloy and BNP Parabis. In the case of BASF,however, there is no disclosure of key management personnel compensation in either a related parties or any othernote to the accounts. Reference is instead made to a separate compensation report included within the corporategovernance section of the annual report.Under IAS 24 companies are required to disclose key management personnel compensation in total and for each ofthe following categories: short-term employee benefits; post-retirement benefits; other long-term benefits; terminationbenefits; and share-based payment (para 17). Of the companies in our sample disclosing key management personnelcompensation in a note to the accounts all but one clearly discloses amounts in line with the IAS 24 definedcategories. The exception to this is Fiat which identifies the total amount paid to directors without giving anybreakdown, disclosing only that the total includes the notional cost of stock options and stock grants paid to the ChiefExecutive Officer without quantifying the amount. In addition, Fiat discloses separately the total compensation paid toexecutives with strategic responsibilities stating that this includes amounts in relation to both defined benefit andcontribution pension plans (Extract 1). No mention is made of the other IAS 24 defined categories.While all other sample companies giving key management personnel compensation information in a note follow IAS24 the format of disclosures is varied. The vast majority of companies including Logica, Belgacom and Astrazeneca(Extract 2) choose to present the information in a tabular format although there are those such as E.on, GroupeDanone and Royal DSM which instead employ a narrative disclosure format.Some companies opt to go beyond what is required by IAS 24. Companies do this by either including additionaldisaggregation when disclosing the types of remuneration or by giving information separately for each member of keymanagement. Two additional types of remuneration disclosed by companies are benefits in kind and bonuses withcompanies identifying the former including Iberdrola Renovables, Anglo American, BNP Parabis and BG. Those todisclose the latter include Novozymes, BG and Nestle. BG makes reference to bonuses with Novozymes disclosingcash bonuses and Nestle identifying both cash and share bonuses separately. Further additional categories identifiedare social security costs which are disclosed by Iberdrola Renovables and Anglo American and Directors fees whichare disclosed by Groupe Danone and BNP Parabis. The former opts to disclose an aggregate figure whereas the lattergives information separately for each director. The information given by BNP Parabis for each director is not limited tosuch fees, however, with other forms of key management personnel information disclosed in the same fashion (Extract3). BNP Parabis, although not for each individual, gives a particularly detailed breakdown of post-retirement benefitsdisclosing information for separate pension schemes. BNP Parabis is not alone in presenting information separatelyfor individual directors. Other companies to do so are ASML, TeliaSonera, Assa Abloy, Aegon and Commerzbank.www.companyreporting.comMonitors ♦ Common Practices ♦ Emerging Issues ♦ Alerts ♦ Benchmarking Reports© Company Reporting, 11 John’s Place, Edinburgh EH6 7EL Scotland, UKPublished on 10 January 2012. For more information, please email cp@companyreporting.com3