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| International Accounting standard(IAS) |
What is the International Accounting Standards (IAS-24)? Describes in details:
IAS 24 (International Accounting Standard 24) is a standard issued by the International Accounting Standards Board (IASB) that provides guidance on related party disclosures. The objective of IAS 24 is to ensure that users of financial statements are provided with relevant information about transactions and relationships between entities and their related parties, which may affect the financial position and performance of the entity.
Key aspects of IAS 24 include:
1.Definition of Related Parties:
Related parties are individuals or entities that have the ability to control, or significantly influence, the financial and operating decisions of the reporting entity. This can include subsidiaries, associates, joint ventures, key management personnel, and close family members of individuals who are in a position to influence decisions.
2.Disclosure Requirements:
Entities are required to disclose information about transactions with related parties, including:
The nature of the relationship.
The amount of transactions.
Outstanding balances at the period-end.
Terms and conditions of transactions (including any guarantees or commitments).
The nature of any guarantees or contingent liabilities provided to or by the related parties.
3.Types of Related Party Transactions:
Related party transactions can include purchases, sales, loans, guarantees, and other financial arrangements between the reporting entity and its related parties.
4.Key Management Personnel:
IAS 24 requires disclosure of compensation paid to key management personnel, which includes salaries, bonuses, stock options, and other benefits.
5.Exemptions:
Some related party transactions may be exempt from disclosure if they are conducted on terms that are similar to those available to the general public (such as transactions with government entities), or if the transactions are insignificant.
6.Purpose of Disclosures:
The purpose of these disclosures is to help users of the financial statements understand the potential influence of related parties on the financial position and performance of the entity. This is important for assessing any possible conflicts of interest, risks, and the overall transparency of financial reporting.
In short, IAS 24 aims to ensure transparency by requiring companies to disclose related party relationships and transactions, allowing users of financial statements to better understand how these relationships might impact the company’s financial results.