Key management personnel

Key management personnel is one of the related parties. Related parties are relationships in which one party has the ability to control or significantly influence the economic and operating decisions of another. Transactions with related parties are a common feature of business.

Key management personnel (KMP) is defined in IAS 24 Related party disclosures as follows:

  1. All directors or members of the governing body of the entity; and
  2. Other persons having the authority and responsibility for planning, directing and controlling the activities of the reporting entity. Where they meet this requirement, key management personnel include:
    1. Where there is a member of the governing body of a whole-of-government entity who has the authority and responsibility for planning, directing, and controlling the activities of the reporting entity, that member;
    2. Any key advisors of that member; and Key management personnel
    3. Unless already included in (a), the senior management group of the reporting entity, including the chief executive or permanent head of the reporting entity.

Remuneration of key management personnel – Any consideration or benefit derived directly or indirectly by key management personnel from the reporting entity for services provided in their capacity as members of the governing body, or otherwise as employees of the reporting entity.

Key management personnel in business combinations

Being a KMP of an entity acquired during the period does not automatically result in that person being a KMP of the acquiring consolidated entity. An assessment should be performed to determine whether (and when) the person becomes a KMP of the acquiring consolidated entity, including consideration of the significance of their role within the acquiring consolidated entity. This could be the date of acquisition or the date the person’s employment commences with the acquiring consolidated entity, whichever is earlier. In other words, the date the person commences as a KMP is unlikely to be before their commencement date with the consolidated entity.

Example Key management personnel

Company A acquires Company B. The CFO of Company B is a KMP of Company B both before and after the acquisition date. From that date, an assessment needs to be performed to determine whether the role of Company B CFO meets the definition of a KMP from the perspective of the Company A Group (with Company A as the parent). This is often a matter of judgement based on the relative importance of Company B to the Company A Group and how executives report to the Group CEO or Board of Directors. Key management personnel


Disclosure when a person becomes a key management person

When an existing employee is promoted or otherwise becomes a KMP of the entity, the employee’s remuneration starts being disclosed in the remuneration report. The amounts disclosed should only be for the period the employee was a KMP. For some elements of compensation, this will be straightforward, while other elements may require more judgement.

Example Key management personnel

On 27 October 20X6, Mr Pine is promoted to Group CFO of Company C, a KMP position. Previously, Mr Pine was the group financial controller, a non-KMP position. Mr Pine’s remuneration from 27 October 20X6 is required to be disclosed in the 30 June 20X7 remuneration report, reflecting his service as a KMP. Remuneration earned (and expensed) prior to this date was not in his capacity as a KMP and is not required to be disclosed. Key management personnel

If Mr Pine received his first share-based payment arrangement as a result of the promotion to Group CFO, then clearly only the amount recognised in the financial statements from the date service commenced in the KMP role for the newly-granted award should be disclosed in the remuneration report.

However, if Mr Pine received share based payment grants in his earlier role, the 30 June 20X7 remuneration report disclosures should only include the portion of the share-based payment expense for those earlier awards relating to the period from 27 October 20X6 to 30 June 20X7. Any share-based payment expense related to Mr Pine’s employment prior to 27 October 20X6 is not disclosed in the 30 June 20X7 remuneration report. Key management personnel

Similarly, any bonus arrangement in force for the full financial year should be apportioned between the periods before and after Mr Pine’s elevation to KMP, with only the amounts apportioned to the period when Mr Pine was a KMP disclosed in the remuneration report. Key management personnel

Key management personnel

Key management personnel

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