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CoreBeginner · Intermediate

Related party transaction

Learning objectives

  • Explain that a related party transaction is a transfer of resources, services or obligations, regardless of whether a price is charged.L1, L2

Normative references

  • IAS 24 §9Definitions. Related party: a person or entity that is related to the entity preparing its financial statements (the reporting entity). (a) A person, or a close member of that person's family, is related if that person has control or joint control of the reporting entity, has significant influence over it, or is a member of the key management personnel of the reporting entity or of its parent. (b) An entity is related in any of the following cases: membership of the same group (parent, subsidiaries and fellow subsidiaries are related to each other); one is an associate or joint venture of the other, or of a member of a group of which the other is a member; both are joint ventures of the same third party; one is a joint venture of a third party and the other is an associate of that third party; a post-employment benefit plan for the benefit of employees of the reporting entity or of an entity related to it (if the reporting entity is itself such a plan, the sponsoring employers are also related to it); an entity controlled or jointly controlled by a person identified in (a); a person who has control or joint control of the reporting entity has significant influence over the entity or is a member of its key management personnel (or of that of its parent); the entity, or any member of a group of which it is a part, provides key management personnel services to the reporting entity or to its parent (management entity). Related party transaction: a transfer of resources, services or obligations between the 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; they include that person's children and spouse or domestic partner, children of that spouse or partner, and dependants of that person or of that spouse or partner (non-exhaustive list). Compensation: all employee benefits as defined in IAS 19, including those to which IFRS 2 applies, paid, payable or provided by the entity, or on its behalf, in exchange for services, including those paid on behalf of a parent in respect of the entity; it comprises short-term employee benefits, post-employment benefits, other long-term benefits, termination benefits and share-based payment. Key management personnel: persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director (whether executive or otherwise). Government: government, government agencies and similar bodies, whether local, national or international; government-related entity: an entity that is controlled, jointly controlled or significantly influenced by a government. Control, investment entity, joint control and significant influence: terms defined in IFRS 10, IFRS 11 and IAS 28 and used with the same meaning; IAS 24 sets no threshold of its own.

Original summaries of the paragraphs (reference register), never a quotation of the standard.

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