IAS 24 Related Party Disclosures: A Practical Guide

What Is IAS 24?

IAS 24 Related Party Disclosures requires entities to disclose information about transactions and balances with related parties. Users of financial statements need to understand where arm's length conditions may not apply — a sale to a parent company or a loan from a director may carry different terms than a commercial transaction.

Defining Related Parties

A person is a related party if they have control, joint control, or significant influence over the entity, or are a member of key management personnel (KMP). Close family members of KMP are included. An entity qualifies as a related party if it is a parent, subsidiary, associate, joint venture, or fellow subsidiary, or is controlled by someone who also controls the reporting entity.

What Must Be Disclosed

Required disclosures include: the parent entity name and ultimate controlling party (even where no transactions occurred); for each related party category, the nature of relationships and transaction details; and KMP compensation split across short-term benefits, post-employment benefits, long-term benefits, termination benefits, and share-based payments. Amounts, terms, and provisions against outstanding balances must all be stated.

Common Pitfalls

Finance teams frequently miss close family member transactions, define KMP too narrowly, or omit intragroup transactions in subsidiary accounts. Describing a transaction as being on arm's length terms is only acceptable where this can be substantiated.

IAS 24 vs FRS 102

UK companies using FRS 102 follow Section 33. Wholly-owned subsidiaries can omit intragroup disclosures if the parent prepares consolidated accounts — an exemption not available under full IFRS. For ACCA students, IAS 24 is examinable in Strategic Business Reporting (SBR).