Best complete read IAS 24 Disclosure Related party transactions

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Disclosure Related party transactions provides a summary of IFRS reporting requirements regarding IAS 24 Related party transactions and a possible disclosure schedule. However, as this publication is a reference tool, no disclosures have been removed based on materiality. Instead, illustrative disclosures for as many common scenarios as possible have been included. Please note that the amounts disclosed in this publication are purely for illustrative purposes and may not be consistent throughout the example disclosure related party transactions.

Presentation

All of the related party information required by IAS 24 that is relevant to the Reporting entity Plc has been presented, or referred to, in one note. This is considered to be a convenient and desirable method of presentation, but there is no requirement to present the information in this manner. Compliance with the standard could also be achieved by disclosing the information in relevant notes throughout the financial statements.

Materiality

The disclosures required by IAS 24 apply to the financial statements when the information is material. According to IAS 1 Presentation of Financial Statements, Disclosure Related party transactionsmateriality depends on the size and nature of an item. It may be necessary to treat an item or a group of items as material because of their nature, even if they would not be judged material on the basis of the amounts involved. This may apply when transactions occur between an entity and parties who have a fiduciary responsibility in relation to that entity, such as those transactions between the entity and its key management personnel. [IAS1.7]

Key management personnel compensation

While the disclosures under paragraph 17 of IAS 24 are subject to materiality, this must be determined based on both quantitative and qualitative factors. In general, it will not be appropriate to omit the aggregate compensation disclosures based on materiality. Whether it will be possible to satisfy the disclosure by reference to another document, such as a remuneration report, will depend on local regulation. IAS 24 itself does not specifically permit such cross-referencing.

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Interest-free term loan No bank debt

Interest-free term loan No bank debt is a case covering several interesting accounting issues under IFRS 9:

  • Initial recognition, recalculating interest-free to an imputed effective interest and classification of capital contribution,
  • Classification of the loan as (business model test and SPPI test),
  • Impairment triggering Interest-free term loan No bank debt
  • Credit stage assessment (Stage 1, Stage 2 or Stage 3)
  • Default assessment Interest-free term loan No bank debt

THE CASE

Parent A advances an unsecured loan for €1m to Subsidiary B on 1 January 2018 with the following terms:

  • 0% interest (assume that a market rate of interest for a
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Refinancing of bank debt

Refinancing of bank debt is a case of different intercompany financing arrangements at arm’s length investment terms and at (more of) intercompany investment terms or at (third party) bank finance terms. As a result it includes quite a lot of special explanations of issues faced in such less standard financing terms.

Assume Parent A advances a €200k unsecured loan to Subsidiary B on 1 January 2018. The loan is interest-free and is repayable in 5 years. At the same time, Bank X advances a €800k secured loan to Subsidiary B. The loan carries market rate of interest of 5% and is repayable in 5 years.

At initial recognition Parent A concluded that the loan to Subsidiary B met the criteria Read more