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Quick Reference on Accounting Standard (AS) 18

Download Quick Reference on Accounting Standard (AS) 18 Related Party Disclosures

AS 18 is not mandatory for non-company SMEs falling in level III.

The requirements of this Standard apply to the financial statements of each reporting enterprise and also to consolidated financial statements presented by a holding company.

Related party disclosure requirements do not apply in circumstances where providing such disclosures would conflict with the reporting enterprise’s duties of confidentiality as specifically required in terms of a statute or by any regulator.

Related party relationships dealt with in AS 18: 

(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

(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

(c) Individuals owning, directly or indirectly, an interest in the voting power of the reporting enterprise that gives them control or significant influence over the enterprise, and relatives of any such individual

(d) KMP and their relatives

(e) Enterprises over which any person described in (c) or (d) is able to exercise significant influence.

Related Party- Parties are considered to be related if at any time during the reporting period, one party has the ability to control the other party or exercise significant influence over the other party in making financial and/or operating decisions.

Relative in relation to an individual, means the spouse, son, daughter, brother, sister, father and mother who may be expected to influence, or be influenced by, that individual in his/her dealings with the reporting enterprise.

Control

(a) ownership, directly or indirectly, of more than one half of the voting power of an enterprise, or

(b) control of the composition of the board of directors in the case of a company or of the composition of the corresponding governing body in case of any other enterprise, or

(c) a substantial interest in voting power and the power to direct, by statute or agreement, the financial and/or operating policies of the enterprise.

Significant influence – Participation in the financial and/or operating policy decisions of an enterprise, but not control of those policies.

Generally, if an investing party holds 20% or more of the voting power of an enterprise, it is presumed that the investing party has significant influence over that enterprise.

Key management personnel – Those persons who have the authority and responsibility for planning, directing and controlling the activities of the reporting enterprise.

Disclosure Requirements

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.

If there have been transactions between related parties, during the existence of a related party relationship, the reporting enterprise should additionally disclose the following information:

  • Description of nature of transaction
  • Volume of transaction (amount or appropriate proportion)
  • Any other elements of related party transaction necessary for understanding of financial statements
  • Amounts written off or written back in the period in respect of debts due from or to related parties
  • Amount or appropriate proportion of outstanding items pertaining to related parties at the balance sheet date and provisions for doubtful debts due from such parties at that date

Items of a similar nature may be disclosed in aggregate by the type of related party, except when separate disclosure is necessary for understanding of the effects of related party transactions.

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