Strategic Business Reporting (International) · Presentation and disclosure in financial statements

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, balances and commitments, plus key management personnel compensation. Related parties may influence decisions or transact on non-arm's length terms. To solve a question, identify the relationship, test the definition, then disclose the nature, amounts and terms of each transaction.

Understand IAS 24 Related Party Disclosures

Normal business is done between independent parties at market prices. Related parties break that assumption. A company might sell goods to its director's family firm at a discount, or lend money to its parent at zero interest. The financial statements still show the numbers, but users cannot tell the deal was unusual. Profit, assets and liabilities may all be affected.

IAS 24 does not stop these transactions and does not change how they are measured. It is a disclosure standard. Its aim is to let users see that related parties exist, and to judge how they may have affected the entity's results and position.

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 to the entity if that person has control or joint control of the entity, has significant influence over it, or is key management personnel of the entity or of its parent. Close family members may include the person's children, the person's spouse or domestic partner, the children of that spouse or domestic partner, and dependants of the person or of the spouse or domestic partner. They are those who may influence, or be influenced by, that person. The list is not exhaustive.

For an entity, it 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 its group. It is also related if both entities are joint ventures of the same third party, or if one is a joint venture of a third entity and the other is an associate of that third entity. It is related if it is controlled or jointly controlled by a person identified above, or if a person with control or joint control of the reporting entity has significant influence over it or is KMP of it or its parent. An entity, or any member of its group, that provides key management personnel services to the reporting entity or to its parent is also related. A post-employment benefit plan for the employees of the entity or a related entity is also a related party.

Key management personnel (KMP) are those with authority and responsibility for planning, directing and controlling the entity's activities, directly or indirectly. This includes any director, executive or not. KMP of the entity's parent also count: a person who is KMP of the parent is related to the entity, so check the parent's management as well as the entity's own. Compensation to KMP must be disclosed in total and by category: short-term employee benefits, post-employment benefits, other long-term benefits, termination benefits and share-based payment.

A related party transaction is a transfer of resources, services or obligations between related parties, whether or not a price is charged. Examples are sales, purchases, loans, guarantees, leases and management services.

Key rules to remember

Parent-subsidiary disclosure: Disclose the parent and the ultimate controlling party, even if there are no transactions; If neither the entity's parent nor the ultimate controlling party produces financial statements available for public use, disclose the name of the next most senior parent that does.
Transaction disclosure: Nature of relationship + amount of transactions + outstanding balances (with terms, security, settlement) + commitments + provisions or expense for bad debts; Required for each related party transaction, and for outstanding balances including commitments. Disclosure is by category where appropriate.
KMP compensation: Total, and each category: short-term, post-employment, other long-term, termination, share-based payment; Disclosed in total and by category. Only compensation of KMP, not other staff.
Arm's length statement: State that terms were equivalent to arm's length only if you can substantiate it; Do not assert it without evidence.
Common non-related examples: Two entities with a common director are not related by that fact alone; providers of finance, trade unions, utilities and a single customer or supplier are not related merely through normal dealings; Look for control, joint control or significant influence, or KMP links, before deciding.
Government-related entities: Exempt from the para 18 disclosures of transactions, outstanding balances (including commitments) and related provisions for transactions and balances with a government that controls, jointly controls or significantly influences the entity, and with other entities that are related because the same government controls, jointly controls or significantly influences them; The exemption is partial and covers only the para 18 disclosures: transactions, outstanding balances including commitments, and related provisions or bad debt expense. Parent and ultimate controlling party disclosures and KMP compensation disclosures are still required. You must also disclose the name of the government and the nature of the relationship, the nature and amount of each individually significant transaction, and the extent of collectively significant transactions.

How to solve IAS 24 Related Party Disclosures questions

Use the same sequence on any IAS 24 scenario. It stops you missing a relationship or disclosing too little.

1Draw a quick map of all parties in the scenario: the entity, its owners, subsidiaries, associates, directors and their families.
2Test each party against the definition: control, joint control, significant influence, or KMP and close family. Write the link next to each name.
3Rule out parties that are not related, such as a bank, a major customer, or a company that shares only one director with no influence. Say why.
4List each transaction and balance with the related party. Include those with no price charged, such as free guarantees or loans.
5State the required disclosure: the relationship, the transaction amounts, outstanding balances, terms, security, and any bad debt provisions or commitments.
6Deal with KMP compensation separately, split by category.
7Comment on the effect on users and any concern, such as transactions not on arm's length terms, or ethical issues around management integrity.
8Finish with a clear conclusion tied to the requirement, such as what goes in the notes.

Quickest way: Relationship, transaction, disclose

When to use it: Use when time is tight, for example in a 5 to 8 mark part of a question, or when the scenario lists many parties.

Underline every person or company named in the scenario.
Write R or NR beside each, with a three-word reason (for example, 'director's spouse' or 'associate, 30%').
For each R, circle the transaction and note its amount.
Write one sentence per R: nature of relationship, amount, balance and terms.
Add the KMP compensation note and the parent and ultimate controlling party line.
If marks are for judgement, add one sentence on why the disclosure matters to users.

Common mistakes in IAS 24 Related Party Disclosures

Treating a company as related just because it shares a director with the entity.
The word 'director' makes students assume a link.
Fix: Check whether that director controls or has significant influence over both, or is KMP of the entity. A shared director alone is not enough under the definition.
Saying two entities are related because one is a major customer or a lender.
Heavy dependence feels like influence.
Fix: Normal dealings with finance providers, customers, suppliers, unions and utilities do not make them related. Look for control or significant influence instead.
Leaving out transactions with no price, such as a free guarantee or an interest-free loan.
Students look only for sales and purchases with an amount.
Fix: IAS 24 covers transfers of resources, services or obligations whether or not a price is charged. Include them and describe the terms.
Disclosing only the transaction amount and forgetting balances, terms and commitments.
The question gives a transaction figure, so it feels complete.
Fix: Add outstanding balances, their terms and security, any guarantees, commitments, and any bad debt expense or provision.
Including all employees' pay in KMP compensation.
Students read it as total staff cost.
Fix: Include only KMP, who plan, direct and control the entity. Include non-executive directors too.
Claiming the transactions were on arm's length terms without evidence.
It sounds reassuring and neat.
Fix: Only make that statement if it can be substantiated. Otherwise just disclose the facts.

Worked examples

Example 1

Alpha Co has the following. (a) It owns 35% of Beta Co and has significant influence. (b) Alpha's finance director, Mr Rao, owns 100% of Gamma Co. (c) Alpha's main bank, Delta Bank, lends it $2 million. (d) Alpha has one supplier, Epsilon Co, which provides 60% of its materials. State which parties are related to Alpha under IAS 24 and why.

Show the solution

Beta Co: Alpha has significant influence, so Beta is an associate. Associate of the entity is a related party.
Mr Rao: finance director is key management personnel of Alpha, so he is a related party.
Gamma Co: Mr Rao, a related party who is KMP, controls Gamma. An entity controlled by KMP of the reporting entity is related. So Gamma is related.
Delta Bank: a provider of finance in the normal course of business is not related by that fact alone. It has no control or significant influence. Not related.
Epsilon Co: dependence as a supplier does not create a related party relationship without control or significant influence. Not related, unless other facts show influence.

Answer: Related: Beta Co (associate), Mr Rao (KMP) and Gamma Co (controlled by KMP). Not related: Delta Bank and Epsilon Co, because normal financing and trading dependence alone does not meet the IAS 24 definition.

Example 2

During the year, Zeta Co sold goods to Eta Co for $400,000. Zeta's managing director controls Eta. At the year end, Eta owed Zeta $90,000, unsecured, due in 60 days. Zeta charged Eta prices 10% below normal list prices. Zeta paid its directors short-term benefits of $1,200,000, post-employment benefits of $150,000 and share-based payment of $200,000. Explain the disclosures required.

Show the solution

Identify the relationship: Eta is controlled by Zeta's managing director, who is KMP of Zeta. So Eta is a related party.
Transaction disclosure: state the nature of the relationship, and sales to Eta of $400,000.
Balance disclosure: $90,000 outstanding at year end, with terms (unsecured, due in 60 days, how settled) and any guarantees. Note any bad debt provision or expense on it.
Terms: the 10% discount shows the terms were not at normal market prices, so Zeta cannot claim arm's length terms. The general rule is that the claim may be made only if it can be substantiated, and here it cannot. Zeta should describe the pricing.
KMP compensation: total = 1,200,000 + 150,000 + 200,000 = $1,550,000.
Disclose the split: short-term benefits $1,200,000, post-employment $150,000, share-based payment $200,000. Termination and other long-term benefits are nil, so no amount is shown for them.

Answer: Disclose that Eta is controlled by Zeta's managing director, sales of $400,000, balance of $90,000 with its terms, the below-list pricing, and KMP compensation of $1,550,000 split by category. Arm's length terms cannot be claimed, because the 10% discount shows the prices were not at market.

Exam tips

In SBR, expect IAS 24 inside a bigger scenario, often alongside group accounts or ethics. Scan the whole scenario for family and director links before you start.
Marks usually go for correctly identifying related parties and explaining why others are not. Always give the reason, not just a label.
Show professional scepticism. If a transaction looks off-market, say that users may be misled and that management integrity could be a concern.
Use the headings in your answer: relationship, transactions, balances and terms, KMP compensation. This makes your points easy to mark.
Remember that IAS 24 gives disclosure only. Do not adjust measurement unless another standard requires it.

Practice questions from Presentation and disclosure in financial statements

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 are related parties under IAS 24?

They are persons or entities with control, joint control or significant influence over the reporting entity, or controlled or influenced by it. This includes parents, subsidiaries, fellow subsidiaries, associates, joint ventures, KMP and their close family members, and entities they control. Post-employment benefit plans for employees are also included.

What is included in key management personnel compensation?

It is all consideration paid for services to KMP, including non-executive directors. Disclose the total and the amount for each category: short-term benefits, post-employment benefits, other long-term benefits, termination benefits and share-based payment.

Do I need to disclose related party transactions if there was no price?

Yes. IAS 24 applies to any transfer of resources, services or obligations, whether or not a price is charged. A free guarantee or interest-free loan is disclosed, with its terms.

Are two companies with a common director related parties?

Not by that fact alone. You need control, joint control or significant influence, or a KMP link under the definition. Always check the director's actual role and holdings before deciding.

Does IAS 24 change how transactions are measured?

No. It is a disclosure standard only. Transactions are measured under the relevant standards, and IAS 24 requires you to disclose their relationship and effect so users can see the context.