IPSAS 20
Active
Related Party Disclosures
Prescribes disclosures about the nature of an entity's related-party relationships, the compensation of its key management personnel, and the amount of transactions with related parties. Effective 1 January 2004.
Active Standard
IPSAS 20 Related Party Disclosures is the current, active standard issued by the IPSASB for disclosing related-party relationships and transactions. It is effective for annual financial statements covering periods beginning on or after 1 January 2004 (earlier application encouraged).
IPSAS 20 is based on IAS 24 Related Party Disclosures, adapted for the public sector with expanded coverage of close family members and key management personnel, and public-sector-specific related-party identification rules.
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Objective, Scope & Definitions (paras. 1–4)
Objective & scope
Requires disclosure of (a) related party relationships where CONTROL exists, and (b) certain transactions between the entity and its related parties – for accountability and to help users better understand financial position and performance. Two principal issues: identifying who controls or significantly influences the entity, and determining what to disclose about transactions with them.
Applies to an entity preparing accrual-basis financial statements, disclosing related party relationships and certain transactions
Paras. 2–3 [Deleted].
Related party – the core definition (para. 4)
Related party
Parties are related if one has the ability to (a) CONTROL the other, or (b) exercise SIGNIFICANT INFLUENCE over the other's financial/operating decisions, OR if both are subject to COMMON CONTROL.
Entities that directly/indirectly control, or are controlled by, the reporting entity Associates (IPSAS 36) Individuals with a significant-influence ownership interest, and their close family members Key management personnel, and their close family members Entities substantially owned by, or over which significant influence is held by, any of the above individuals
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Close Members of the Family & Key Management Personnel (paras. 4–9)
Close family members – presumed unless rebutted (para. 5)
Spouse, domestic partner, dependent child, or relative living in a common household Grandparent, parent, non-dependent child, grandchild, brother, or sister Spouse/domestic partner of a child; parent-in-law; brother-in-law; sister-in-law
The presumption can be rebutted with evidence to the contrary (e.g. an estranged spouse).
Key management personnel (para. 4, with paras. 6–9)
ALL directors or members of the governing body Whole-of-government: the elected/appointed representative with oversight authority, any key advisors of that person, and the senior management group including the chief executive/permanent head
Whether a "key advisor" qualifies is a matter of JUDGMENT – some possess special working relationships and access to privileged information amounting to significant influence, even without formal authority (para. 7). In some jurisdictions, only elected Cabinet-level members qualify as KMP for the whole-of-government entity, since civil servants may lack sufficient authority (para. 8).
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Identifying Related Parties – Substance Over Form (paras. 10–17)
Deemed NOT related parties (para. 12)
Providers of finance in the ordinary course of their business Trade unions Parties in the course of normal dealings, by virtue only of those dealings (even if they can circumscribe the entity's freedom of action) An entity whose relationship is SOLELY that of an agency
A shared key management person between two entities doesn't AUTOMATICALLY create a related party relationship – it must be ASSESSED for the likelihood of influence over BOTH entities' mutual dealings (para. 11).
Economic dependency – usually not enough on its own (para. 14)
A single customer, supplier, franchisor, distributor, or general agent transacting significant volume with a public sector entity is NOT a related party merely from that economic dependency. BUT dependency combined with OTHER factors may create significant influence – and therefore a related party relationship. Where an entity is economically dependent on another, disclosure of that dependency is ENCOURAGED (not required).
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Why Related Party Disclosure Matters in the Public Sector (paras. 18–19)
Related party relationships pervade government (para. 18)
Administrative units operate under the overall direction of executive government and, ultimately, Parliament/legislature Departments/agencies often conduct activities through separate controlled entities, or entities over which they have significant influence Ministers/elected officials can exert significant influence over department/agency operations
Three reasons disclosure is needed (para. 19)
Related party relationships can influence how an entity operates with others, individually and collectively They might expose the entity to RISKS, or provide OPPORTUNITIES, that wouldn't exist without the relationship Related parties may transact on terms UNRELATED parties would not agree to – a real risk given the highest integrity standards expected of public monies
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Disclosure of Control (paras. 25–26)
Disclosed regardless of transactions
Related party relationships where CONTROL exists → disclosed, irrespective of whether any transactions have occurred
This means disclosing: the names of any controlled entities, the name of the IMMEDIATE controlling entity, and the name of the ULTIMATE controlling entity (if any) – so readers can form a view of the effects of these relationships regardless of transaction activity.
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Disclosure of Related Party Transactions (paras. 27–33)
The arm's-length carve-out (para. 27)
Disclosure is required for related party transactions EXCEPT those occurring within a normal supplier/client relationship, on terms no more or less favorable than an arm's-length transaction in the same circumstances.
WHERE DISCLOSURE IS REQUIRED, DISCLOSE
Nature of the related party relationships Types of transactions that occurred Elements necessary to clarify significance to operations, sufficient for relevant, faithfully representative decision-making information
Example triggers (para. 28): rendering/receiving services; purchases/transfers of goods, property, other assets; agency arrangements; leasing; R&D transfer; license agreements; finance (loans, capital contributions, grants, cost-sharing); guarantees and collateral.
The intra-government carve-out (para. 29)
Departments are related parties (common control) – but disclosure is NOT required for transactions between them that are (a) consistent with NORMAL operating relationships, and (b) on terms/conditions NORMAL for such transactions in that jurisdiction – even if free of charge or below cost.
Nature of relationship (controlling, controlled, common control, or KMP) Description of transactions per broad class, and the VOLUME (monetary amount or proportion) Summary of broad terms/conditions, including how they differ from unrelated-party norms Amounts or proportions of outstanding items
Items of a SIMILAR nature may be aggregated, unless separate disclosure is necessary for decision-making/accountability (para. 32). Disclosure between economic-entity members is UNNECESSARY in consolidated statements – those transactions are eliminated on consolidation (except investment-entity FVSD holdings); associate transactions under the equity method are NOT eliminated and DO require disclosure (para. 33).
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Disclosure – Key Management Personnel (para. 34)
Required KMP disclosures – regardless of arm's-length status
AGGREGATE remuneration of key management personnel, and the number of individuals (full-time equivalent basis), by major class Total amount of ALL OTHER remuneration/compensation to KMP and their close family members – split between the two groups For loans NOT widely available (or not widely known to be available): amount advanced, amount repaid, closing balance, and terms/conditions, per individual
Unlike para. 27's general transaction disclosure, KMP disclosures apply WHETHER OR NOT the transactions occurred on an arm's-length basis (para. 35).
Measurement & classification notes
Number receiving remuneration is estimated on a FULL-TIME EQUIVALENT basis (para. 36) An individual in BOTH the governing body and senior management group is counted in only ONE class Where benefit cost isn't determinable, a BEST ESTIMATE is used (para. 37) Non-monetary remuneration, if reliably measured and included, requires a note on the measurement basis (para. 38, cross-ref IPSAS 39)
Remuneration EXCLUDES reimbursement of expenditure incurred for the entity's benefit (e.g. work-travel accommodation costs) (para. 16). It also excludes benefits derived in a capacity OTHER than as employee/governing-body member, though para. 34 requires disclosure of certain OTHER such benefits separately.
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Effective Date & Amendment Timeline (paras. 42–43)
Amendment history at a glance
Base Standard: periods beginning on/after 1 January 2004.
EffectiveChange
1 Jan 2017Para. 43 (IPSAS 33); paras. 27, 32 (Improvements to IPSAS 2015)
–Paras. 4, 15, 24, 33 amended – IPSAS 35, IPSAS 37 & IPSAS 38, all issued January 2015, applied together
1 Jan 2018Paras. 2, 3 deleted – The Applicability of IPSAS (Apr 2016)
1 Jan 2018Para. 38 – IPSAS 39, Employee Benefits (Jul 2016)
Para. 43: when an entity adopts accrual-basis IPSAS after the effective date (per IPSAS 33), this Standard applies from the date of adoption.
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Relationship to IAS/IFRS – Comparison with IAS 24
Comparison – IPSAS 20 vs IAS 24
IPSAS 20 is drawn primarily from IAS 24 (Reformatted 1994), Related Party Disclosures – an older version than the current IFRS Standard.
TopicDifference
StructureIPSAS 20's structure differs substantially from IAS 24
Wholly-owned subsidiary exclusionIAS 24's exclusion for wholly-owned subsidiaries in the same domicile as the parent (with local consolidated statements) is NOT adopted in IPSAS 20
Key management personnel definitionIPSAS 20 has a formal definition; IAS 24's commentary includes close family, while IPSAS 20's KMP definition itself does NOT include close family (they're addressed separately)
Related party definitionIPSAS 20 formally includes relationships that IAS 24 addresses only in commentary
Remuneration of KMP definitionIPSAS 20 defines it; IAS 24 does not
KMP disclosure breadthIPSAS 20 adds disclosures for KMP remuneration/close-family remuneration and certain other KMP transactions
Normal-terms exclusion scopeIPSAS 20 excludes MORE related party transactions from disclosure (normal-terms transactions) than IAS 24's narrower exclusions
Terminology"Members of the governing body" (IPSAS 20) vs "directors" (IAS 24)
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Statement / Process Mapping
Disclosure decision map
- Is the counterparty a related party – control, significant influence, common control, or KMP/close family? If no → outside this Standard entirely
- Does CONTROL exist? → disclose the relationship regardless of any transactions (names of controlled/controlling entities) (§5)
- Have transactions occurred? Were they on ARM'S-LENGTH terms, in the ordinary course? If yes → generally NO disclosure required (§6)
- Is it an intra-government transaction consistent with NORMAL operating relationships and NORMAL terms for that jurisdiction? → excluded from disclosure even if free/below cost (§6)
- Does the transaction involve KEY MANAGEMENT PERSONNEL or their close family? → disclose remuneration, other compensation, and specified loan details REGARDLESS of arm's-length status (§7)
Concept-to-statement mapping table
IPSAS 20 conceptStatement(s)Notes
Names of controlled/controlling entitiesNotesRequired regardless of transaction activity
Non-arm's-length related party transactionsNotesNature, type, and significance disclosed
KMP aggregate remunerationNotesBy class, on a full-time-equivalent headcount basis
KMP / close-family loans (not widely available)NotesPer-individual advance, repayment, closing balance, terms
Intra-economic-entity transactions–Eliminated on consolidation – no separate disclosure needed
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Related Standards – Cross-Reference Map
How IPSAS 20 connects across the IPSAS body of literature
StandardNature of the connection
IPSAS 1Requires disclosure of amounts payable to/receivable from controlling entities, fellow controlled entities, associates, and other related parties (§1)
IPSAS 14Planned intra-economic-entity transfers may require IPSAS 14 AND IPSAS 20 disclosure even without a binding provision (cross-ref from IPSAS 19)
IPSAS 35Consolidation eliminates intra-economic-entity related party transactions (except investment-entity FVSD holdings) (§6)
IPSAS 36Associates fall within the related party definition; equity-method transactions are NOT eliminated and require disclosure (§1, §6)
IPSAS 37Joint arrangement counterparties considered when identifying related parties (§8 amendment history)
IPSAS 38Disclosure of Interests in Other Entities – complements IPSAS 20's related party lens with a structural/ownership lens (§8 amendment history)
IPSAS 39Governs the measurement of employee benefits included within KMP remuneration disclosures (§7)
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Quick-Reference Glossary
Related party
A party with the ability to control or significantly influence another, or subject to common control with it.
Related party transaction
A transfer of resources or obligations between related parties, regardless of whether a price is charged.
Key management personnel
Governing body members plus other persons with authority and responsibility for planning, directing, and controlling the entity's activities.
Close members of the family
Close relatives or immediate family members expected to influence, or be influenced by, an individual in dealings with the entity.
Significant influence
Power to participate in financial/operating policy decisions, without control over those policies.
Remuneration of key management personnel
Consideration or benefit derived from the reporting entity for services provided as a governing body member or employee.
Financial statement key
Notes Notes to the financial statements