Related party disclosures - Company Reporting

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and 80% of Iberdrola Renovables owned by Iberdrola. In both cases a detailed breakdown of income and expenseamounts and transaction balances is presented showing transactions with the controlling party and fellow subsidiaries.In addition, Iberdrola Renovables gives a breakdown of financing received from its parent including a currency andmaturity analysis and a disaggregation into fixed and floating (Extract 11). Iberdrola Renovables further gives adetailed description of agreements entered into with its parent and fellow subsidiaries.Post-Employment Benefit PlanOf the companies in our sample ten makes reference to a post-employment benefit plan being a related party. Ofthese five are financial institutions. The information disclosed by these companies varies with Commerzbank statingthat external providers of occupational pensions for employees are considered related parties but give no furtherinformation. Aegon goes a stage further by disclosing that it provides reinsurance, asset management andadministrative services to pension funds but stops short of giving any quantified information in relation to fees. Each ofthe other financial institutions which are Lloyd’s Banking Group, BNP Parabis and UBS also make reference toproviding services for employee benefit funds but give quantified fee information. The information given by UBS, interms of detail, surpasses that given by its peers as not only is reference made in the related parties note, a specificsection exists within the post-retirement benefits note. Within this section UBS in addition to giving a breakdown offees and services discloses details of a scheme whereby bank properties were sold to a pension fund and atransaction analysis of UBS securities held by the pension fund (Extract 12).For the non-financial companies including BAE Systems, BMW and TeliaSonera that make reference to a pensionplan being a related party on the whole the level of disclosure is less detailed. Nestlé however, outlines how one of itssubsidiaries acts as an asset manager on behalf of a pension plan disclosing the fees that it receives in return for suchservices. There is also quantification in relation to the amount of assets under management. ITV also makes aninteresting disclosure by identifying that a pensions funding partnership has been established. Under thisarrangement, an interest in a partnership, which owns a company subsidiary, has been contributed to the pensionfund. ITV makes it clear that it consolidates both the partnership and the subsidiary.Stand out companiesItalian companies Eni and Fiat are worthy of praise for the sheer detail of the related party information that ispresented. Both companies present a full analysis of related party transactions by type including separate quantifieddisclosure for transactions with each related party. The information disclosed is not confined to the related parties notewith both companies presenting additional primary financial statement information so as to exhibit the impact ofrelated party transactions as a whole. It should be noted that the information presented is largely as a result ofnational legislation but the fact remains that the information presented far outstrips that given by companies from othercountries. Italy could easily be considered to be leading the way in terms of related party transaction disclosures.Other companies that are worthy of note are UBS which has early adopted revised IAS 24 and provides a detailedbreakdown of transactions with post-employment benefit plans and BNP Parabis for the clarity of its disclosures inrelation to key management personnel compensation, associates and joint ventures.In contrast, companies which could improve the quality of related party transactions are BASF which does not disclosekey management compensation in a related party or any other note to the accounts. Other companies which couldimprove their related party disclosures are BG which expresses associate and joint venture amounts in aggregate andL'air Liquide which within its related parties note includes information in relation to the impact that proportionatelyconsolidated entities have on the income statement and balance sheet that could easily be deemed superfluous.Summary - ConclusionOur principal conclusions are that: Key management compensation is widely disclosed with a number of companies going beyond what isrequired by IAS 24. The most detailed related party information is given by Italian companies as a result of national legislation. Financial institutions are the companies which are most likely to identify governments as related parties. Financial institutions are more likely than other companies to identify a post-employment benefit plan as arelated party.
CR Common PracticesRelated Party DisclosuresIllustrative ExtractsFiat: Key management personnel compensation (Extract 1)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.com7
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Related party disclosures - Company Reporting

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