Strategic Business Reporting (International) · Other reporting issues

IAS 24 Related Party Disclosures for ACCA SBR

Updated 11 October 2026 · Fact-checked

IAS 24 requires an entity to disclose its related party relationships, transactions and outstanding balances, plus key management personnel compensation. You solve a question by identifying each party, testing the relationship against the IAS 24 definition, listing the transactions, then stating the disclosures. It is about transparency, not measurement.

Understand IAS 24 Related Party Disclosures

Financial statements assume that transactions are made between independent parties at arm's length. That assumption fails when the parties are connected. A company might sell goods to a director's family firm at a low price, or lend money to its parent at no interest. Profit, assets and liabilities can then be affected by the relationship, not by market forces.

IAS 24 does not stop these dealings and does not adjust the numbers. It makes sure users know the relationships exist and what happened between the parties. Users can then judge the risks and opportunities the entity faces. This is why SBR questions on IAS 24 are about disclosure and judgement.

A related party is a person or entity related to the reporting entity. A person (or a close member of that person's family) is related if they have control or joint control of the reporting entity, or have significant influence over it, or are key management personnel of the reporting entity or of its parent. The words "or of its parent" apply to the key management limb. An entity is related if it is in the same group (parent, subsidiary, fellow subsidiary), or is an associate or joint venture of the entity or of a member of the group the entity belongs to. Two entities are also related if both are joint ventures of the same third party, or if one is a joint venture of a third party and the other is an associate of that third party. An entity is also related if it is controlled or jointly controlled by a related person. It is also related if a person (or close family member) who controls or jointly controls one entity has significant influence over, or is key management of, the other (or its parent). Being a director of both entities is not enough on its own. Post-employment benefit plans for the employees of the entity are related parties too.

Key management personnel are those with authority and responsibility for planning, directing and controlling the entity's activities, directly or indirectly. This includes directors, executive or not. Close members of the family are those who may be expected to influence, or be influenced by, that person in dealings with the entity. Examples include a spouse or partner, children, and dependants.

A related party transaction is a transfer of resources, services or obligations between related parties, whether or not a price is charged. Some things are not related parties by themselves: two entities that simply share a director are not related unless the other tests are met. Neither are providers of finance, trade unions, public utilities or government departments, merely through normal dealings with the entity. A single customer or supplier is not related just because of economic dependence.

Key rules to remember

Related party transaction: Transfer of resources, services or obligations between related parties, whether or not a price is charged; A free loan or a guarantee is still a transaction and must be disclosed.
Parent-subsidiary disclosure: Disclose the relationship between parent and subsidiaries, whether or not there have been transactions; Also disclose the name of the parent and, if different, the ultimate controlling party.
Key management personnel compensation: Disclose in total and by category: short-term employee benefits, post-employment benefits, other long-term benefits, termination benefits, share-based payment; This is required in total for key management personnel, not director by director.
Transaction disclosures: Amount of transactions + amount of outstanding balances (terms, security, settlement form, guarantees) + provisions for doubtful debts + expense recognised for bad debts; Disclose these for each related party relationship that has had transactions.
Aggregation: Items of a similar nature may be disclosed in aggregate; Not if separate disclosure is needed to understand the effect on the financial statements.
Arm's length statement: Only state that terms were equivalent to an arm's length transaction if this can be substantiated; Do not assume it.

How to solve IAS 24 Related Party Disclosures questions

Use this method for any IAS 24 scenario question. It keeps you tied to the definition and avoids guessing.

1List every person and entity named in the scenario and the link each one has to the reporting entity.
2Test each link against the IAS 24 definition: control, joint control, significant influence, key management personnel, or close family of such a person.
3Mark the pairs that are not related, and say why (for example, a shared director only, or a normal supplier).
4List the transactions and balances with the related parties, including free or below-market dealings, loans and guarantees.
5State the disclosures: nature of the relationship, amounts, outstanding balances with terms, and key management compensation by category.
6Explain why the information matters to users, such as the effect of terms that are not at arm's length.
7Comment on any accounting or ethical issue, such as a transaction hidden from disclosure, then conclude.

Quickest way: Three-column scan

When to use it: Use when time is short and the scenario has many names and dealings.

Draw three columns in your plan: party, link to the entity, related? (yes or no).
Beside each yes, write the transaction and the balance.
Write the disclosure list once, then apply it to each yes.
Add one sentence on why users need it, then move on.

Common mistakes in IAS 24 Related Party Disclosures

Treating two entities as related just because they have a common director.
The word 'common' looks like a link, so students stop checking.
Fix: Test the definition. A common director alone does not make entities related. They are related only if a person (or close family member) who controls or jointly controls one entity has significant influence over, or is key management of, the other (or its parent).
Saying related party transactions must be adjusted to market value.
Students confuse disclosure with measurement.
Fix: IAS 24 requires disclosure only. Record the transaction under the relevant standard, then disclose the related party aspects.
Leaving out transactions with no price, such as guarantees or free services.
Students look only for sales and purchases.
Fix: The definition covers any transfer of resources, services or obligations, whether or not a price is charged.
Disclosing key management pay director by director only, or omitting share-based payment.
Students mix IAS 24 with local company law requirements.
Fix: Give the total and the category analysis required by IAS 24, including share-based payment.
Forgetting parent-subsidiary relationships when no transactions took place.
Students think disclosure always depends on a transaction.
Fix: Control relationships are disclosed regardless. Name the parent and the ultimate controlling party.
Claiming terms were at arm's length without evidence.
It sounds reassuring and is quick to write.
Fix: Only make the statement if it can be substantiated. Otherwise leave it out and describe the actual terms.

Worked examples

Example 1

Tarn Co is the parent of Vale Co (80% owned). Tarn owns 30% of Ness Co and has significant influence. Rana is a director of Tarn and owns 100% of Orin Co. Tarn bought goods from Orin Co during the year. Tarn also supplies Pell Co, its largest customer, which has no other link to Tarn. In Tarn's own financial statements, which parties are related?

Show the solution

Vale Co: Tarn controls it as a subsidiary, so it is related.
Ness Co: Tarn has significant influence, so it is an associate and is related.
Rana: a director of Tarn is key management personnel, so Rana is related.
Orin Co: it is controlled by Rana, who is key management personnel of Tarn. So Orin Co is related.
Pell Co: it is only a customer, even if the largest. Economic dependence alone does not create a related party relationship, so it is not related.
Therefore the purchases from Orin Co are related party transactions to be disclosed.

Answer: Vale Co, Ness Co, Rana and Orin Co are related parties of Tarn. Pell Co is not. Tarn must disclose the Orin Co purchases, amounts, outstanding balances and terms, and the key management compensation.

Example 2

Kiln Co's directors are its key management personnel. The finance director's husband runs a firm that Kiln Co hired for consulting at ₹40,00,000, and ₹12,00,000 was unpaid at year end. The market rate for the work would have been about ₹55,00,000. The finance director argues disclosure is unnecessary because the amount is paid on normal credit terms. Advise on the reporting.

Show the solution

The finance director is key management personnel, so her close family member (her husband) is within the person limb of the definition. His firm is related to Kiln if it is controlled or jointly controlled by him. Significant influence by him alone would not be enough. The scenario says he runs the firm, so assume he controls it, and confirm this.
The consulting is a transfer of services for a price, so it is a related party transaction.
Disclose the nature of the relationship, the transaction amount of ₹40,00,000 and the outstanding balance of ₹12,00,000, with its terms, security and settlement form.
The disclosures about provisions for doubtful debts and bad debt expense are not relevant for Kiln, because Kiln is the payer and those are given by the party holding the receivable. Any guarantees given or received would still be disclosed.
The related party's firm charged ₹15,00,000 below the market rate (₹55,00,000 less ₹40,00,000). IAS 24 does not adjust the price, but the difference is exactly why users need the disclosure. Kiln must not state arm's length terms, since it cannot substantiate them.
The finance director's argument is wrong. Normal credit terms do not remove the disclosure requirement, because disclosure depends on the relationship and the transaction, not on how unusual the credit terms are.
Ethically, the director should not suppress the disclosure. Omission would mislead users and breach the principle of integrity.

Answer: Assuming the husband controls or jointly controls the firm, Kiln must disclose the relationship, the ₹40,00,000 transaction, the ₹12,00,000 balance and its terms. The firm charged ₹15,00,000 below market, so Kiln must not claim arm's length terms. The finance director's argument is wrong, because disclosure does not depend on the credit terms being unusual.

Exam tips

Always test each party against the definition and say why it passes or fails. Marks go for the reasoning, not just the conclusion.
Look for hidden links: close family members, a director's business, and entities controlled by key management.
Mention that IAS 24 requires disclosure and not adjustment. Use this to avoid wasting time on measurement.
Link to ethics where a director hides or minimises a transaction. This earns professional skills marks.
Present disclosures in a short list, then add one line on why users need them.

Practice questions from Other reporting issues

IAS 24 Related Party Disclosures in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

IAS 24 Related Party Disclosures: frequently asked questions

Who is a related party under IAS 24?

It is a person or entity linked to the reporting entity through control, joint control, significant influence, or key management responsibility. It includes close family members of such people and entities they control. Parents, subsidiaries, fellow subsidiaries, associates, joint ventures and post-employment benefit plans are also covered.

What must be disclosed for key management personnel compensation?

You disclose the total compensation and the totals for each category: short-term employee benefits, post-employment benefits, other long-term benefits, termination benefits and share-based payment. Individual amounts are not required by IAS 24.

Do related party transactions need to be at arm's length?

No. IAS 24 does not require market terms. It requires disclosure of the transaction and its terms so users can judge the effect. An arm's length statement can only be made if it can be substantiated.

How is IAS 24 examined in SBR?

It usually appears inside a scenario, often in a reporting and ethics question or as a part of a group or other reporting question. You are asked to identify related parties, explain the disclosures and discuss any ethical issue.