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AS 18
RELATED PARTY DISCLOSURES
Objective:
The standard establishes requirements for the
disclosure of
related party relationships; and
transactions between a reporting enterprise and its
related parties.
Scope: The
accounting standard is applicable to disclose related party
disclosure in the financial statements of each Reporting
Enterprise and the consolidated financial statements presented
by a Holding company.
Definitions: Related
party: Parties are
said to be related if at any time during the reporting period,
one party has the ability to a)
control the other party or
b) Exercise
significant influence over the
other party
in making financial decisions
Control:
a. Ownership, directly or indirectly, of
more than one half of the voting power.
b. Control of composition
of board of directors of a company.
c. A substantial interest in voting power (20% or more)
AND power under
statute/agreement to direct financial and/or operating policies
of the enterprise.
Significant influence:
Participation in financial and/or operating policy decisions but not
control.
(May be gained by share ownership, statute and agreement)
The following are
non related parties:
a. Two companies have a director in common. b. Two
companies have a single customer, single supplier or general
agent for both companies. c. Trade
unions d. Public
utilities, Government departments and government agencies.
4. Volume of transactions either as an amount or as an appropriate
proportion.
5. Any other element of the transaction necessary for an understanding of
the financial statements.
6. Amounts or appropriate proportions of the outstanding items pertaining
to related parties at balance sheet date and provision for
doubtful debts due for such parties; and
7. Amounts written off or written back in the period in respect of dues
from or to related parties. |
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