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AS 18



The standard establishes requirements for the disclosure of related party relationships; and transactions between a reporting enterprise and its related parties.


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.





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



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. 


Examples of Related party transactions:

ü     Purchase or sales of goods;

ü     Purchase or sale of fixed assets;

ü     Rendering or receiving services;

ü     Agency agreements;

ü     Leasing or hire purchase arrangements



The following are to be disclosed:

1. Name of transacting related party;

2. Description of the relationship;

3. Description of the nature of transactions;


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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