IAS 24
Active
Related Party Disclosures
Prescribes the disclosure requirements for related party relationships, transactions, outstanding balances and commitments to ensure users understand their potential effect on the financial statements.
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Conceptual Framework Linkage
Why related party disclosure is a pure transparency standard
IAS 24 recognises related party relationships and transactions are a NORMAL feature of business, but that they can affect an entity's financial position and performance in ways that differ from arm's-length dealings. The Framework's relevance and faithful representation objectives require users to be able to identify these effects.
HOW IAS 24 MAPS TO THE FRAMEWORK
Relevance – knowledge of related party transactions and outstanding balances is essential to evaluating an entity's operations, since terms may differ from those with unrelated parties Faithful representation – profit or loss and financial position could be different had the transactions not occurred, or occurred on different terms – disclosure preserves users' ability to interpret figures correctly No recognition/measurement change – IAS 24 is a PURE disclosure standard; it does not require related party transactions to be measured differently from unrelated transactions
Unlike almost every other standard in this library, IAS 24 has NO recognition or measurement rules of its own – it exists entirely to ensure the EXISTENCE and NATURE of related party influence is visible to users, who can then judge for themselves whether reported figures might be affected.
Why disclosure, not remeasurement, is the mechanism
The Framework does not require transactions to be remeasured simply because a special relationship exists – it requires enough information for users to assess POTENTIAL effects themselves.
Approach NOT taken by IAS 24Approach actually taken
Adjusting related party transaction amounts to "fair" arm's-length valuesDisclosing the actual terms and amounts, letting users judge
Prohibiting related party transactionsRequiring transparency about their existence and nature
Qualitative characteristics in action: IAS 24 is essentially a codification of neutrality – it doesn't pass judgement on whether related party dealings are appropriate, it simply ensures they are visible.
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Scope & Applicability
What IAS 24 covers
IAS 24 shall be applied in: identifying related party relationships and transactions; identifying outstanding balances (including commitments) between an entity and its related parties; identifying circumstances requiring disclosure; and determining the disclosures to be made about those items.
APPLIES TO
The separate financial statements of a parent, venturer, or investor, as well as consolidated financial statements – related party disclosures are required in BOTH.
Intragroup related party transactions and balances are ELIMINATED in consolidated financial statements, so IAS 24 disclosures matter most for TRANSACTIONS THAT SURVIVE consolidation – e.g. those with associates, joint ventures, or key management personnel.
Key definitions you must know
Related party
A person or entity that is related to the entity preparing its financial statements (the "reporting entity") – defined via control, joint control, significant influence, or key management personnel relationships (Section 3).
Related party transaction
A transfer of resources, services, or obligations between a reporting entity and a related party, REGARDLESS of whether a price is charged.
Close members of the family
Family members who may be expected to influence, or be influenced by, that person in their dealings with the entity – includes the person's children, spouse/domestic partner, and dependants of the person or their spouse/domestic partner.
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Identifying Related Parties – The Full List
A party is related to the reporting entity if ANY of the following apply
A PERSON OR CLOSE FAMILY MEMBER IS RELATED IF THEY
Have control or joint control over the reporting entity Have significant influence over the reporting entity Are a member of key management personnel of the reporting entity, or of a parent of the reporting entity
AN ENTITY IS RELATED IF ANY OF THE FOLLOWING APPLY
The entity and the reporting entity are members of the same GROUP (parent, subsidiaries, fellow subsidiaries) One entity is an associate or joint venture of the other (or of a member of a group of which the other is a member) Both entities are joint ventures of the SAME third party One entity is a joint venture of a third entity, and the other is an associate of that same third entity The entity is a post-employment benefit plan for the benefit of employees of either the reporting entity or an entity related to it The entity is controlled/jointly controlled by a person identified in the "person" list above A person with control/joint control over the reporting entity has significant influence over the entity, or is a member of its key management personnel The entity, or any member of a group of which it is a part, provides key management personnel services to the reporting entity or its parent
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Control, Joint Control & Significant Influence (with worked example)
The three underlying relationship concepts
ConceptTypical threshold
ControlPower to govern financial/operating policies to obtain benefits – typically majority voting rights (IFRS 10)
Joint controlContractually agreed sharing of control, requiring unanimous consent of the controlling parties (IFRS 11)
Significant influencePower to participate in financial/operating policy decisions, without control – often presumed at 20%+ voting power (IAS 28)
These definitions are BORROWED from IFRS 10, IFRS 11, and IAS 28 respectively – IAS 24 does not redefine them, it simply uses them as the basis for identifying related parties.
Worked example – chain of related parties
Example 1: Mapping a related party chain
Company A owns 100% of Company B (subsidiary). Company A also holds a 30% investment in Company C, over which it has significant influence but not control. The CEO of Company A is also a non-executive director of Company D, an unrelated third-party manufacturer with no other links to Group A.
Related to Company B (in B's financial statements): Company A (parent), Company C (fellow related entity via A's significant influence)
Related to Company A: Company B (subsidiary), Company C (associate), and the CEO (key management personnel)
Company D is NOT automatically a related party of Group A merely because a shared individual sits on both boards, UNLESS that individual is also key management personnel of Group A with SIGNIFICANT influence over both entities' transactions – a common exam trap testing the boundary of the definition.
Related to Company A: Company B (subsidiary), Company C (associate), and the CEO (key management personnel)
Company D is NOT automatically a related party of Group A merely because a shared individual sits on both boards, UNLESS that individual is also key management personnel of Group A with SIGNIFICANT influence over both entities' transactions – a common exam trap testing the boundary of the definition.
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Key Management Personnel (KMP)
Definition, compensation disclosure & worked example
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 (executive or otherwise) of that entity.
COMPENSATION CATEGORIES REQUIRING DISCLOSURE – TOTAL AND BY CATEGORY
Short-term employee benefits (salary, bonus) Post-employment benefits (pension contributions) Other long-term benefits Termination benefits Share-based payment
Example 2: KMP compensation disclosure
A company's board comprises 5 directors. Total salaries paid: $2,100,000. Pension contributions: $180,000. Share options granted, fair value at grant: $95,000. A termination payment of $250,000 was made to a departing director.
Disclosed by CATEGORY, not just as a lump sum: Short-term benefits $2,100,000; Post-employment benefits $180,000; Share-based payment $95,000; Termination benefits $250,000 – Total KMP compensation: $2,625,000
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Related Party Transactions – Examples Requiring Disclosure
Typical transactions requiring disclosure if material
Purchases or sales of goods (finished or unfinished) Purchases or sales of property and other assets Rendering or receiving of services Leases Transfers of research and development Transfers under licence agreements Transfers under finance arrangements (including loans and equity contributions in cash or in kind) Provision of guarantees or collateral Commitments to do something if a particular event occurs/does not occur in the future, including executory contracts (recognised and unrecognised) Settlement of liabilities on behalf of the entity or by the entity on behalf of another party
Disclosure is required EVEN IF NO PRICE IS CHARGED – e.g. a parent providing free management services to a subsidiary is still a related party transaction requiring disclosure, since the definition explicitly covers transfers "regardless of whether a price is charged."
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Government-Related Entities – The Exemption
Partial exemption for government-related entities
A reporting entity is EXEMPT from the general disclosure requirements for transactions and outstanding balances with: (a) a government that has control, joint control, or significant influence over the reporting entity; and (b) another entity that is a related party because the SAME government has control, joint control, or significant influence over both the reporting entity and the other entity.
EVEN WHEN EXEMPT, THE ENTITY MUST STILL DISCLOSE
The name of the government and the nature of its relationship Sufficient information for users to understand the effect of related party transactions on the financial statements – including the nature and amount of each individually significant transaction, and a qualitative/quantitative indication of the extent of other transactions that are collectively (but not individually) significant
This exemption exists specifically to avoid onerous disclosure burdens for state-owned/controlled entities operating in economies with substantial government involvement (e.g. many state-owned utilities or banks) – but it does NOT eliminate disclosure entirely, only reduces the level of detail required for routine government-related transactions.
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What Is NOT a Related Party – Explicit Exclusions
IAS 24 explicitly excludes the following from the related party definition
Two entities simply because they have a director or key management person in COMMON, or because a key manager of one has significant influence over the other, UNLESS the broader definition tests in Section 3 are also independently met Two joint venturers simply because they share JOINT CONTROL of a joint venture Providers of finance, trade unions, public utilities, and government departments/agencies, simply in the COURSE of their normal dealings with an entity (even though they may affect its freedom of action or participate in its decision-making) A single customer, supplier, franchisor, distributor, or general agent with whom an entity transacts a significant volume of business, MERELY by virtue of the resulting economic dependence
A frequently tested exam trap: a company's single largest customer, representing 60% of its revenue, is NOT automatically a related party – economic dependence alone does not satisfy IAS 24's control/influence/KMP tests.
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Disclosure Requirements
Required disclosures
RELATIONSHIP & PARENT DISCLOSURES
Relationships between parents and subsidiaries must be disclosed, IRRESPECTIVE of whether transactions occurred between them The name of the entity's parent, and the ultimate controlling party if different, disclosed regardless of whether that party prepares financial statements available for public use
TRANSACTION & BALANCE DISCLOSURES
Total KMP compensation, and by each category For each category of related party (parent, entities with joint control/significant influence, subsidiaries, associates, joint ventures, KMP, other related parties): nature of the relationship, amount of transactions, amount of outstanding balances (with terms/conditions and details of guarantees given/received) Provisions for doubtful related party debt, and expense recognised for bad/doubtful debts from related parties
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Critical Judgments & Estimates
Where management judgement matters most
SIGNIFICANT JUDGEMENTS
Whether a person genuinely holds "significant influence" or is truly a member of key management personnel, especially in less formal governance structures Whether an entity qualifies for the government-related entity exemption, and how much detail is "sufficient" under the reduced disclosure requirement Substance-over-form assessment of relationships (e.g. informal but influential family or business connections not captured by a strict legal reading of the definition)
SIGNIFICANT ESTIMATES
Fair value of non-cash consideration or below-market terms in related party transactions, where separately relevant to other standards (e.g. IFRS 2, IFRS 9) Materiality threshold applied in aggregating "collectively significant" transactions under the government-related entity exemption
IAS 24 requires disclosure of the relationship EVEN IF NO TRANSACTIONS OCCURRED – a common oversight, since preparers often assume disclosure is only needed where an actual transaction took place.
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IFRS vs US GAAP – Key Differences
Comparison – IAS 24 vs US GAAP (ASC 850)
FeatureIFRS (IAS 24)US GAAP
KMP compensation disclosureDetailed disclosure BY CATEGORY (short-term, post-employment, share-based, etc.) requiredLess prescriptive on category-level breakdown; SEC proxy rules separately govern executive compensation disclosure in detail
Government-related entity exemptionSpecific partial exemption availableNo direct equivalent exemption; disclosure generally required regardless of government ownership
Definition breadthBroad, principles-based definition covering control/joint control/significant influence/KMPBroadly similar conceptually, though specific US GAAP guidance and SEC rules add more prescriptive detail in places
MeasurementNo measurement requirement – pure disclosure standardAlso no measurement requirement – pure disclosure standard, converged in this respect
The two frameworks are broadly aligned in philosophy – both are disclosure-only standards – with the main practical differences lying in the LEVEL of prescribed disclosure detail (especially KMP compensation categorisation) and the government-entity exemption unique to IFRS.
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Statement Mapping – Where Every Related Party Item Lands
Comprehensive event-to-statement mapping table
Event / transactionStatement(s) affectedNotes
Sale of goods to a related partySOPL SOFPRecognised at the ACTUAL transaction terms (no automatic remeasurement); disclosed separately
Outstanding related party receivable/payableSOFPDisclosed separately from unrelated balances, with terms and any guarantees
KMP compensation (salaries, bonuses, pensions, share-based payment)SOPLRecognised per the relevant standard (IAS 19, IFRS 2); disclosed by category under IAS 24
Provision for doubtful related party debtSOPL SOFPRecognised per IFRS 9's expected credit loss model; separately disclosed
Guarantees given/received involving related partiesNotesDisclosed even if not recognised as a liability under IAS 37
Parent/subsidiary relationship (no transactions)NotesMUST be disclosed regardless of whether any transaction occurred
Government-related entity transactions (exempt)NotesReduced disclosure – name of government, nature of relationship, significant transaction details
Cash flows from related party transactionsCash Flow StatementClassified per normal IAS 7 rules – no special related party classification
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Related Standards – Cross-Reference Map
How IAS 24 connects across the IFRS body of literature
StandardNature of the connection
IFRS 10Supplies the definition of "control" that underpins identification of parent-subsidiary related party relationships
IFRS 11Supplies the "joint control" definition used to identify joint venture-related parties
IAS 28Supplies the "significant influence" definition (typically 20%+ voting power presumption) used to identify associate-related parties
IAS 19Post-employment benefit plans for the entity's own employees are explicitly identified as related parties, and KMP post-employment benefits must be disclosed by category
IFRS 2Share-based payment awards to KMP are a distinct compensation category requiring separate related party disclosure
IAS 37Guarantees and commitments involving related parties, whether or not they meet IAS 37's recognition criteria, require IAS 24 disclosure
IFRS 9Impairment allowances on related party receivables follow IFRS 9's expected credit loss model, with the resulting provision separately disclosed under IAS 24
IFRS 12Provides broader disclosure requirements about interests in other entities that complement, and sometimes overlap with, IAS 24's related party disclosures
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Quick-Reference Glossary
Government
Government, government agencies, and similar bodies, whether local, national, or international.
Government-related entity
An entity controlled, jointly controlled, or significantly influenced by a government.
Compensation
All employee benefits (IAS 19), including those in the form of share-based payment (IFRS 2), payable, or in exchange for services rendered to the entity – required disclosure for key management personnel.
Close members of the family of a person
Family members expected to influence, or be influenced by, that person – includes children, spouse/domestic partner, and dependants.
Ultimate controlling party
The party at the very top of a group structure that ultimately controls the reporting entity – disclosed regardless of whether it prepares publicly available financial statements.
Reporting entity
The entity preparing its own financial statements – the reference point against which all related party relationships in IAS 24 are assessed.
Financial statement key
BS Balance sheet
IS Income statement
SE Statement of changes in equity
OCI Other comprehensive income
SCF Statement of cash flows
History & Development
Mar-1983
Exposure Draft E25 Disclosure of Related Party Transactions
Jul-1984
IAS 24 Related Party Disclosures issued
Effective 1 January 1986
1994
IAS 24 was reformatted
18-Dec-2003
IAS 24 Related Party Disclosures
Effective for annual periods beginning on or after 1 January 2005
22-Feb-2007
Exposure Draft State-controlled Entities and the Definition of a Related Party published
Comment deadline 25 May 2007
11-Dec-2008
Exposure Draft Relationships with the State (Proposed amendments to IAS 24) published
Comment deadline 13 March 2009
04-Nov-2009
IAS 24 Related Party Disclosures issued
Effective for annual periods beginning on or after 1 January 2011
12-Dec-2013
Amended by Annual Improvements to IFRSs 2010-2012 Cycle (entities providing key management personnel services)
Effective for annual periods beginning on or after 1 July 2014