Financial Reporting · Ind AS 24 Related Party Disclosures

Ind AS 24: Definition of Related Party and Related Party Relationships

Updated 5 October 2026 · Fact-checked

A related party is a person or entity related to the reporting entity through control, joint control, significant influence, key management personnel status, or membership of the same group, associate, joint venture or post-employment plan. To solve a question, identify the reporting entity, test each party one by one, and look at the relationship from both sides.

Understand Definition of Related Party and Related Party Relationships

Ind AS 24 exists because transactions with related parties may not be at arm's length. Users of financial statements need to know who the related parties are before they can judge the effect of such dealings on profit, assets and risk.

Start with the reporting entity. Every test is applied from its point of view. A party is related if it controls, is controlled by, or is under common control with the reporting entity, or has joint control or significant influence over it.

For a person or a close member of that person's family, the person is related to the reporting entity if the person (i) has control or joint control over the reporting entity, (ii) has significant influence over it, or (iii) is a member of its key management personnel, or of the key management personnel of its parent. Close members of the family are family members who may be expected to influence, or be influenced by, that person in dealings with the entity. They include the person's children, spouse or domestic partner, children of the spouse or domestic partner, and dependants of the person or of the spouse or domestic partner.

An entity is related to the reporting entity if, among other cases, it is a member of the same group (parent, subsidiary, fellow subsidiary), or is an associate or joint venture of the reporting entity or of a member of its group. 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 entity and the other is an associate of that third entity. A post-employment benefit plan for the employees of the reporting entity or of a related entity is also a related party.

The entity is also related if it is controlled or jointly controlled by a person identified above, or if such a person has significant influence over it or is a member of its key management personnel (or that of its parent). Finally, an entity, or any member of a group of which it is part, that provides key management personnel services to the reporting entity or its parent is related. Many exam traps sit in these cross-links, so draw the structure first.

Key rules to remember

Person-related test: Person (or close family member) is related if the person: controls / jointly controls the entity, OR has significant influence, OR is KMP of the entity or its parent; Apply it to the person first, then extend to the person's close family members.
Close members of the family: Children + spouse/domestic partner + children of spouse/domestic partner + dependants of the person or spouse/domestic partner; This is an inclusive list. Parents and siblings are not named in it; they count only if they may be expected to influence, or be influenced by, the person.
Entity-related test (same group): Parent, subsidiary and fellow subsidiary are all related to each other; Fellow subsidiaries are related even if they never transact with each other.
Associate / joint venture links: Entity A is related to B if A is an associate or JV of B (or of a member of B's group); Works in both directions: the investor is related to the investee.
Two JVs of the same third party: X and Y are related if both are joint ventures of the same third entity; One JV and one associate of the same third entity are also related. Two associates of the same investor are not related by this rule alone.
Post-employment plan: Plan for employees of the reporting entity or of a related entity is a related party; If the reporting entity is itself the plan, its sponsoring employers are also related to it.
Not necessarily related: Two entities with a common director; two venturers sharing joint control of a JV; providers of finance, trade unions, public utilities, departments of government; a single customer, supplier, franchisor or distributor with whom the entity transacts significantly; Mere dealings or economic dependence do not create a related party relationship.

How to solve Definition of Related Party and Related Party Relationships questions

Use the same fixed routine for every case question. It stops you from missing a link or adding a wrong one.

1Name the reporting entity. All tests are from its viewpoint, so decide this before anything else.
2Draw a quick structure: parent, subsidiaries, associates, JVs and the persons behind each. Add the percentages or rights given.
3Classify each link as control, joint control, significant influence or none. Use voting rights, board power or agreements, not just the shareholding percentage.
4Test each person: are they in control, joint control, significant influence, or KMP of the entity or its parent? Then add their close family members.
5Test each entity: same group, associate or JV of the entity or its group, JV or associate of the same third party, controlled by a related person, or a post-employment plan.
6Check for exclusions: common director only, joint venturers only, providers of finance, and so on. Remove them unless another link exists.
7Write the conclusion for each party in the form: relationship, reason, related or not related.

Quickest way: Draw-and-tick method

When to use it: Use it for MCQs and short written parts where a group structure or list of persons is given.

Write the reporting entity in the centre and put each party around it.
Write one letter beside each party: C for control, J for joint control, S for significant influence, K for KMP, G for same group, P for plan.
No letter means not related, unless it is a close family member of a person who has a letter.
For two other entities, check whether both hang from the same third party as JV or JV and associate.
Watch for the words only a common director or only a customer. These usually signal not related.

Common mistakes in Definition of Related Party and Related Party Relationships

Treating two entities with a common director as related parties.
It feels like a link, since the same person sits on both boards.
Fix: A common director or KMP alone does not make entities related. They are related only if the person controls, jointly controls or significantly influences one, or the entity-test criteria apply.
Treating two venturers in the same joint venture as related to each other.
Students see the shared arrangement and assume a link.
Fix: Venturers that merely share joint control of a JV are not related by that fact alone. Each venturer is related to the JV, not to the other venturer.
Leaving out fellow subsidiaries.
Students look only at the parent-subsidiary line.
Fix: Every member of the same group is related. Test parent, subsidiaries and fellow subsidiaries together.
Treating a major customer, supplier or bank as a related party because of heavy dealings.
Economic dependence looks like influence.
Fix: Providers of finance, trade unions, public utilities, government departments and a single customer or supplier are not related merely from normal dealings. Look for control or significant influence.
Applying the close-family definition only to spouse and children.
Students memorise a short list.
Fix: Include the spouse or domestic partner, children, the spouse's or partner's children, and dependants of either. Anyone else counts only if expected to influence or be influenced by the person.
Ignoring post-employment benefit plans.
Plans seem like funds, not parties.
Fix: A plan for employees of the reporting entity or of a related entity is a related party. Add it to your list.

Worked examples

Example 1

Case: Alpha Ltd (reporting entity) holds 60% of Beta Ltd and 30% of Gamma Ltd, with significant influence over Gamma. Mr. Rao owns 55% of Alpha Ltd. Delta Ltd is a wholly owned subsidiary of Mr. Rao. Epsilon Ltd is a supplier that provides 40% of Alpha's purchases and has no ownership link. Identify the related parties of Alpha Ltd with reasons.

Show the solution

Reporting entity: Alpha Ltd.
Beta Ltd: Alpha holds 60%, so it controls Beta. Beta is a subsidiary and a related party.
Gamma Ltd: Alpha has significant influence, so Gamma is an associate and a related party.
Mr. Rao: holds 55% and so controls Alpha. He is a related party, and his close family members are also related parties.
Delta Ltd: it is controlled by Mr. Rao, a person who controls Alpha. So Delta is under common control with Alpha and is related.
Epsilon Ltd: only a major supplier. Economic dependence alone does not make it related, and there is no control or influence.

Answer: Related parties of Alpha Ltd are Beta Ltd (subsidiary), Gamma Ltd (associate), Mr. Rao (controls Alpha), his close family members, and Delta Ltd (controlled by Mr. Rao). Epsilon Ltd is not a related party.

Example 2

Case: Zeta Ltd and Eta Ltd are two entities. Both are joint ventures of Theta Ltd. Iota Ltd is an associate of Theta Ltd. Kappa Ltd and Lambda Ltd are two venturers who share joint control of Mu Ltd, a joint venture. Mr. Shah is a director of both Zeta Ltd and Nu Ltd, and has no control or influence over either. Analyse: (a) Is Zeta related to Eta? (b) Is Zeta related to Iota? (c) Is Kappa related to Lambda? (d) Is Zeta related to Nu?

Show the solution

(a) Zeta and Eta are both joint ventures of the same third entity, Theta. Under the entity test, they are related.
(b) Zeta is a joint venture of Theta and Iota is an associate of Theta. One is a JV and the other an associate of the same third entity, so they are related.
(c) Kappa and Lambda are only venturers sharing joint control of Mu. This alone does not make them related to each other. Each is related to Mu.
(d) Zeta and Nu share only a common director who has no control or influence over either. This is not enough, so they are not related.

Answer: (a) Related. (b) Related. (c) Not related to each other merely because of the JV. (d) Not related.

Exam tips

Start every case with the reporting entity and a small diagram. Marks are awarded for the reasoning on each party, not just the final list.
Memorise the exclusions (common director, joint venturers, providers of finance, a single customer or supplier). They are the favourite MCQ traps.
Write each conclusion as: relationship, test applied, result. This follows the provision-facts-conclusion pattern examiners like.
In MCQs, read for words like only, merely and solely. They often signal that the relationship is not enough.

Practice questions from Ind AS 24 Related Party Disclosures

Definition of Related Party and Related Party Relationships in other exams

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

Definition of Related Party and Related Party Relationships: frequently asked questions

Who are close members of the family under Ind AS 24?

They are family members who may be expected to influence, or be influenced by, the person in dealings with the entity. The standard includes the person's children, spouse or domestic partner, children of the spouse or domestic partner, and dependants of the person or the spouse or domestic partner. The list is inclusive, not exhaustive.

Are two associates of the same investor related to each other?

Not by that fact alone. The standard makes two joint ventures of the same third party related, and also a joint venture and an associate of the same third party. Two associates of the same investor are not named in that rule.

Is a post-employment benefit plan a related party?

Yes. A post-employment benefit plan for the employees of the reporting entity, or of any entity related to it, is a related party. If the reporting entity is itself such a plan, its sponsoring employers are related to it.

Do control, joint control and significant influence have the same meaning as in other Ind AS?

Yes. Ind AS 24 uses the meanings from Ind AS 110, Ind AS 111 and Ind AS 28. So you must be able to judge control and significant influence before applying the related party test.