IAS 24 requires entities to disclose relationships, transactions, and balances with related parties to ensure transparency and help users assess the risk of influence or conflict of interest.
- Objective of IAS 24
To ensure that financial statements contain the necessary disclosures to draw attention to the possibility that an entity’s financial position and results may have been affected by related party relationships or transactions.
- What is a Related Party? (IAS 24.9)
A related party includes:
- Entities with control, joint control, or significant influence over the reporting entity.
- Key management personnel (KMP) of the entity or its parent.
- Close family members of any of the above.
- Entities controlled or significantly influenced by KMP or their family members.
Examples:
- Parent-subsidiary
- Joint ventures or associates
- Directors and their family-owned companies
- Disclosures Required
If there were related party transactions, an entity must disclose:
| Disclosure Item | Details |
| Nature of relationship | Even if no transactions occurred |
| Type of transactions | E.g. sales, purchases, loans, guarantees, remuneration |
| Transaction amounts | During the year |
| Outstanding balances | At year-end, including terms and settlement |
| Provisions for doubtful debts | On related party balances |
| Expenses recognised for bad debts | From related parties |
- Special Notes on Key Management Personnel (KMP)
Entities must disclose KMP compensation in total and by category:
- Short-term employee benefits
- Post-employment benefits
- Other long-term benefits
- Termination benefits
- Share-based payments
Example: Simple Disclosure
During the year, the Company entered into the following transactions with related parties:
- Sales of goods to its parent entity amounting to $500,000.
- A loan of $15,000 was granted to a director. The loan is unsecured, interest-free, and repayable on demand.
As at year-end, a balance of $15,000 remained outstanding.
Common Mistake (and Link to IAS 8):
Failing to disclose a related party loan or transaction, even if small, is often material by nature — it must be corrected under IAS 8 and disclosed under IAS 24.