As 18
As 18
As 18
Paragraphs 1-9
DEFINITIONS
10-14
15-19
DISCLOSURE
20-27
ILLUSTRATION
Objective
The objective of this Standard is to establish requirements for disclosure of:
(a) related party relationships; and
(b) transactions between a reporting enterprise and its related parties.
Scope
1. This Standard should be applied in reporting related party
relationships and transactions between a reporting enterprise and
its related parties. The requirements of this Standard apply to the
financial statements of each reporting enterprise as also to consolidated
financial statements presented by a holding company.
2. This Standard applies only to related party relationships described
in paragraph 3.
3. This Standard deals only with related party relationships described in
(a) to (e) below:
(a) enterprises that directly, or indirectly through one or more intermediaries, control, or are controlled by, or are under common
control with, the reporting enterprise (this includes holding
companies, subsidiaries and fellow subsidiaries);
(b) associates and joint ventures of the reporting enterprise and the
investing party or venturer in respect of which the reporting
enterprise is an associate or a joint venture;
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AS 18
Definitions
10. For the purpose of this Standard, the following terms are used
with the meanings specified:
10.1
10.2
10.3
10.5
10.6
10.7
10.8
10.9
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AS 18
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AS 18
19. Sometimes, transactions would not have taken place if the related party
relationship had not existed. For example, a company that sold a large
proportion of its production to its holding company at cost might not have
found an alternative customer if the holding company had not purchased
the goods.
Disclosure
20. The statutes governing an enterprise often require disclosure in financial
statements of transactions with certain categories of related parties. In
particular, attention is focussed on transactions with the directors or similar
key management personnel of an enterprise, especially their remuneration
and borrowings, because of the fiduciary nature of their relationship with
the enterprise.
21. Name of the related party and nature of the related party relationship
where control exists should be disclosed irrespective of whether or not
there have been transactions between the related parties.
22. Where the reporting enterprise controls, or is controlled by, another
party, this information is relevant to the users of financial statements
irrespective of whether or not transactions have taken place with that party.
This is because the existence of control relationship may prevent the reporting
enterprise from being independent in making its financial and/or operating
decisions. The disclosure of the name of the related party and the nature of
the related party relationship where control exists may sometimes be at least
as relevant in appraising an enterprises prospects as are the operating results
and the financial position presented in its financial statements. Such a
related party may establish the enterprises credit standing, determine the
source and price of its raw materials, and determine to whom and at what
price the product is sold.
23. If there have been transactions between related parties, during the
existence of a related party relationship, the reporting enterprise should
disclose the following:
(i) the name of the transacting related party;
(ii) a description of the relationship between the parties;
(iii) a description of the nature of transactions;
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AS 18
Illustration
Note: This illustration does not form part of the Accounting Standard. Its purpose is to assist in clarifying the meaning of
the Accounting Standard.
The manner of disclosures required by paragraphs 23 and 26 of AS 18 is illustrated as below. It may be noted that the
format given below is merely illustrative in nature and is not exhaustive.
Holding
Company
Purchases of goods
Sale of goods
Purchase of fixed assets
Sale of fixed assets
Rendering of services
Receiving of services
Agency arrangements
Leasing or hire purchase
arrangements
Transfer of research
and development
Subsidiaries
Fellow
Subsidiaries
Associates
Key
Relatives of Total
Management Key
Personnel
Management
Personnel
Licence agreements
Finance (including
loans and equity
contributions in
cash or in kind)
Guarantees and collaterals
Management contracts
including for deputation
of employees
Note:
Names of related parties and description of relationship:
1.
2.
3.
4.
5.
6.
Holding Company
Subsidiaries
Fellow Subsidiaries
Associates
Key Management Personnel
Relatives of Key Management Personnel
A Ltd.
B Ltd. and C (P) Ltd.
D Ltd. and Q Ltd.
X Ltd., Y Ltd. and Z (P) Ltd.
Mr. Y and Mr. Z
Mrs. Y (wife of Mr. Y), Mr. F (father of Mr. Z)