Management entity

Learning objectives

• Identify the management entity that provides key management personnel services to the entity or to its parent.L2, L3, L4

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.
• IAS 24 §17AWhen the entity obtains key management personnel services from another entity (management entity), it is not required to apply para. 17 to the compensation paid or payable by the management entity to its own employees or directors; the amounts incurred by the entity for those services are disclosed under para. 18A. Added by the Annual Improvements 2010-2012 Cycle (December 2013), annual periods beginning on or after 1 July 2014, earlier application permitted (para. 28C).

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

1 question

• The firm Gestion & Conseil makes its managing partner available to Tarn SA, where he acts as chief executive, a member of Tarn's key management personnel. Tarn prepares financial statements. Is the firm a related party of Tarn?L2