ASBE No. 36
Active
Related Party Disclosures
Related Party Disclosures is part of the Chinese Accounting Standards for Business Enterprises (ASBE).
1
Conceptual Framework Linkage
Transparency about relationships that could influence transaction terms
ASBE No. 36 governs the DISCLOSURE of RELATIONSHIPS, TRANSACTIONS, and OUTSTANDING balances BETWEEN an ENTERPRISE and its RELATED parties – ENSURING readers UNDERSTAND WHERE a REPORTED transaction MIGHT NOT have been CONDUCTED on PURELY arm's-LENGTH terms. THIS Standard is CLOSELY converged with IAS 24 internationally, INCLUDING a GENUINELY important EXEMPTION relevant to China'S OWN state-enterprise LANDSCAPE (Section 5).
2
Scope – Who Counts as a Related Party
A relationship-based, not simply transaction-based, definition
A RELATED party is a PERSON or ENTITY that is RELATED to the REPORTING enterprise THROUGH control, JOINT control, SIGNIFICANT influence, OR family/management RELATIONSHIPS – this Standard REQUIRES disclosure WHEREVER SUCH a relationship EXISTS, REGARDLESS of WHETHER any TRANSACTION has ACTUALLY occurred BETWEEN the parties.
3
Control, Joint Control, and Significant Influence Relationships
The core categories of related party
RelationshipDescription
Parent, subsidiaries, fellow subsidiariesENTITIES within the SAME group STRUCTURE, sharing COMMON control
Associates and joint venturesENTITIES over WHICH the reporting ENTERPRISE (or ITS group) has SIGNIFICANT influence or JOINT control
4
Key Management Personnel and Close Family Members
Individuals with authority and responsibility for planning and control
KEY MANAGEMENT personnel – those WITH authority and RESPONSIBILITY for PLANNING, directing, and CONTROLLING the ENTERPRISE'S activities (e.g. DIRECTORS and SENIOR executives) – and THEIR close FAMILY members are TREATED as RELATED parties, GIVEN their POTENTIAL to INFLUENCE, or BE influenced by, the ENTERPRISE.
5
THE GOVERNMENT-RELATED ENTITIES EXEMPTION – A Point of Genuine Alignment
Reduced disclosure for entities under common government control
CONSISTENT with IAS 24 (WHICH added an EQUIVALENT exemption IN 2009), ASBE No. 36 PROVIDES a REDUCED disclosure EXEMPTION for an ENTERPRISE that is a GOVERNMENT-related ENTITY, in RESPECT of TRANSACTIONS with OTHER entities that are ALSO government-RELATED, SOLELY BECAUSE both are UNDER common STATE control (RATHER than a SPECIFIC direct RELATIONSHIP between the TWO entities THEMSELVES). GENUINELY NOTABLY, THIS is a POINT of ALIGNMENT, RATHER than a DIVERGENCE – BOTH ASBE and IAS 24 RECOGNISE that TREATING every STATE-owned entity as AUTOMATICALLY related to EVERY other state-OWNED entity (MERELY due to COMMON government OWNERSHIP) would be BOTH impractical and of LIMITED analytical VALUE.
6
Why the Exemption Matters for China's State-Owned Enterprise Landscape
A genuinely important practical relief
GIVEN the SCALE of STATE ownership ACROSS the Chinese ECONOMY, WITHOUT this EXEMPTION, VIRTUALLY every TRANSACTION a state-OWNED enterprise UNDERTAKES with ANOTHER state-OWNED counterparty (a BANK, a SUPPLIER, a CUSTOMER) WOULD technically REQUIRE related-PARTY disclosure, PRODUCING an OVERWHELMING volume of DISCLOSURE with LIMITED genuine ANALYTICAL value for READERS. THE exemption ALLOWS such ENTITIES to disclose ONLY the NAME of the GOVERNMENT and the NATURE of its RELATIONSHIP, PLUS INFORMATION about INDIVIDUALLY significant TRANSACTIONS, RATHER than EXHAUSTIVE detail on EVERY government-RELATED counterparty.
7
Disclosure of Terms and Conditions
Whether transactions were on arm's-length terms
FOR related PARTY transactions REQUIRING disclosure, an ENTERPRISE discloses the NATURE of the RELATIONSHIP, the AMOUNT of the TRANSACTIONS, OUTSTANDING balances, and the TERMS and CONDITIONS (INCLUDING WHETHER they were CONDUCTED on TERMS EQUIVALENT to those PREVAILING in ARM'S-length transactions).
8
Worked Example – Identifying a Related Party Under Common Control
Fellow subsidiaries within the same group
Example: Two subsidiaries of the same private parent
Company A and Company B are both wholly-owned subsidiaries of the same private parent company. During the year, Company A sells goods to Company B at a discounted price.
COMPANY A and COMPANY B are RELATED parties (FELLOW subsidiaries UNDER common CONTROL) – the TRANSACTION REQUIRES disclosure of ITS nature, AMOUNT, and WHETHER the PRICING reflects ARM'S-length terms.
9
Worked Example – Applying the Government-Related Entities Exemption
Reduced disclosure for a state-owned bank transaction
Example: A state-owned enterprise borrowing from a state-owned bank
A state-owned manufacturing company obtains a routine commercial loan from a state-owned bank, with no direct ownership or control relationship between the two beyond both being ultimately state-controlled.
GIVEN the GOVERNMENT-related entities EXEMPTION, the COMPANY need ONLY disclose the NAME of the GOVERNMENT and the NATURE of the RELATIONSHIP, RATHER than the FULL detailed TRANSACTION disclosure OTHERWISE required – UNLESS the LOAN is INDIVIDUALLY significant, in WHICH case ADDITIONAL detail would be REQUIRED.
10
Disclosure Requirements
What ASBE No. 36 requires
Relationships between parents and subsidiaries, regardless of whether transactions occurredKey management personnel compensationNature, amount, and terms of related party transactions and outstanding balances
11
Critical Judgments & Estimates
Where judgement matters most
SIGNIFICANT JUDGEMENTS
Whether an individually significant transaction with a government-related entity requires fuller disclosureIdentifying key management personnel and their close family members
SIGNIFICANT ESTIMATES
Fair value of non-cash consideration in related party transactions
12
Relationship to IAS 24
Comparison – ASBE 36 vs IAS 24
FeatureASBE 36IAS 24
General related party definitionControl, joint control, significant influenceControl, joint control, significant influence – converged
Government-related entities exemptionAvailableAvailable (added 2009) – converged
A GENUINELY thoroughly CONVERGED standard, INCLUDING the GOVERNMENT-related entities EXEMPTION – a MEANINGFUL practical relief GIVEN China'S OWN state-enterprise LANDSCAPE.
13
Statement Mapping
Where every related party disclosure lands
EventStatement(s) affectedNotes
Related party transactions/balancesNotes onlyNo effect on primary financial statement figures, unless separately required by another standard
14
Related Standards
Cross-reference map
StandardConnection
ASBE No. 2Long-term Equity Investments – supplies the control and significant influence concepts this Standard's related party definition relies on
15
Quick-Reference Glossary
Government-related entities exemption
A reduced disclosure exemption for transactions between entities under common government control, absent a specific direct relationship.
Key management personnel
Individuals with authority and responsibility for planning, directing, and controlling an enterprise's activities.
Financial statement key (Chinese GAAP / ASBE terminology)
BS Balance Sheet (资产负债表)
IS Income Statement (利润表)
SCOE Statement of Changes in Owners' Equity (所有者权益变动表)
CFS Cash Flow Statement (现金流量表)
History & Development
2006-02
ASBE No. 36 Related Party Disclosures issued
Operative for periods beginning on or after 1 February 2007