Financial Reporting · Ind AS 24 Related Party Disclosures

Objective, Scope and Purpose of Ind AS 24 Related Party Disclosures

Updated 5 October 2026 · Fact-checked

Ind AS 24 requires an entity to disclose related party relationships, transactions, outstanding balances and commitments, so users can see how these may have affected its financial position and profit or loss. It applies to identifying and disclosing such items in both consolidated and separate statements. To solve a question, identify the relationship, then the item, then the exemption.

Understand Objective, Scope and Purpose of Ind AS 24

Entities do not always deal at arm's length. A company may sell goods to its promoter's firm at a low price, lend money to a director interest-free, or share costs with a group company. Such dealings can change profit and financial position. The statements may look normal, yet the numbers reflect a relationship and not a free market.

The objective of Ind AS 24 is to make sure the financial statements contain the disclosures needed to draw attention to the possibility that the financial position and profit or loss may have been affected by the existence of related parties, and by transactions, balances and commitments with them.

The purpose is transparency. Related parties may be able to influence terms. Even where no transaction took place, the relationship itself can affect how the entity behaves, for example when a parent decides to stop supplying a subsidiary. So the standard asks for disclosure of certain relationships even without transactions.

The scope covers: identifying related party relationships and transactions; identifying outstanding balances, including commitments, between an entity and its related parties; identifying the circumstances in which disclosure of these items is required; and determining the disclosures to be made. It applies in consolidated and separate financial statements of a parent, investors with joint control or significant influence, and investors' separate statements.

There are two key exemptions. Intragroup related party transactions and balances are eliminated in preparing consolidated financial statements of the group, so they do not appear there. Also, a reporting entity that is a government-related entity is exempt from disclosing transactions and balances with the government that controls, jointly controls or significantly influences it, and with other entities related because the same government controls them. Such an entity must still give certain information about those dealings, as the standard requires.

Key rules to remember

Objective: Disclose related party relationships, transactions, balances and commitments so users can see their possible effect on financial position and profit or loss; Use this as the opening line of any theory answer.
Scope: items covered: Relationships + transactions + outstanding balances (including commitments) + circumstances requiring disclosure + the disclosures themselves; Ind AS 24 applies to consolidated and separate financial statements.
Intragroup exemption: Intragroup related party items are eliminated on consolidation, so they are not disclosed in the consolidated statements; They are still disclosed in the separate financial statements of the parent and of each subsidiary.
Government-related entity exemption: Exempt from full disclosure of transactions and balances with the controlling or influencing government and with other entities related because of the same government; The exemption is partial: the standard still requires some information about these dealings.
Parent-subsidiary relationship: Relationship must be disclosed irrespective of whether any transactions took place; Disclose the name of the parent and, if different, the ultimate controlling party.

How to solve Objective, Scope and Purpose of Ind AS 24 questions

Use this method for any scope or purpose question, whether theory or a short case.

1State the objective in one line: users must see the possible effect of related party relationships, transactions, balances and commitments on the financial statements.
2Identify the reporting entity and whether the question concerns consolidated or separate statements.
3List the relationships in the facts: parent, subsidiary, associate, joint venture, key management personnel, government.
4Check what is being reported: relationship only, transaction, outstanding balance, or commitment.
5Apply the exemptions: intragroup items on consolidation; the government-related entity exemption where the counterparty is the controlling government or related through it.
6Conclude with what must be disclosed and where, linking the conclusion to the purpose of transparency.

Quickest way: Three-question scan

When to use it: Use when time is short, especially for the 30% case-scenario MCQs.

Which statements: consolidated or separate? Intragroup items vanish only in consolidated.
Who is the counterparty: group member, key management, or the controlling government?
Is it a relationship, a transaction, or a balance? Parent relationships are disclosed even with no transactions.

Common mistakes in Objective, Scope and Purpose of Ind AS 24

Saying intragroup transactions are never disclosed under Ind AS 24.
Students remember the consolidation exemption and forget the separate statements.
Fix: Write that they are eliminated in consolidated statements but still disclosed in the separate statements of the parent and subsidiaries.
Believing disclosure is needed only when transactions occurred.
The word 'transactions' dominates the topic.
Fix: Remember that parent-subsidiary relationships are disclosed even if there were no transactions, along with the controlling party's name.
Treating the government-related entity exemption as a complete exemption from all disclosure.
Notes are summarised as 'exempt'.
Fix: Say the exemption is from the full disclosure requirements for those dealings, and the standard still asks for some information on their nature and amount.
Applying the exemption to every transaction with any government body.
Students ignore the condition of control, joint control or significant influence.
Fix: Check that the government controls, jointly controls or significantly influences the reporting entity, or that the other entity is related through the same government.
Ignoring commitments and outstanding balances in the scope.
Students focus on profit and loss items.
Fix: List balances and commitments explicitly in your answer, since the objective and scope both name them.

Worked examples

Example 1

Alpha Ltd, an Ind AS company, has a subsidiary Beta Ltd. During the year Alpha sold goods worth ₹50,00,000 to Beta, and ₹8,00,000 remained receivable at year end. Alpha prepares consolidated and separate financial statements. Advise on the Ind AS 24 disclosure of this transaction and balance.

Show the solution

Identify the relationship: Alpha is the parent and Beta is its subsidiary, so they are related parties.
Consolidated statements: the group presents Alpha and Beta as a single entity. The sale of ₹50,00,000 and the receivable of ₹8,00,000 are intragroup and are eliminated on consolidation.
Because they are eliminated, Ind AS 24 does not require them to be disclosed as related party items in the consolidated statements.
Separate statements: Alpha's own statements are not eliminated. The sale and the receivable must be disclosed there, with the nature of the relationship.
Beta's separate statements must also disclose the purchase and the payable of ₹8,00,000.

Answer: The ₹50,00,000 sale and ₹8,00,000 balance are not disclosed in the consolidated statements, as they are eliminated. They are disclosed in the separate financial statements of Alpha and of Beta, together with the parent-subsidiary relationship.

Example 2

Gamma Ltd is a state-owned company controlled by the State Government. During the year it bought electricity from a State Electricity Board, which is also controlled by the same State Government, for ₹3,00,00,000. It also gave a loan of ₹20,00,000 to a director who is key management personnel. Discuss the Ind AS 24 position.

Show the solution

Identify the government link: the State Government controls Gamma, so Gamma is a government-related entity.
The State Electricity Board is controlled by the same government, so it is a related party of Gamma through that government.
The electricity purchase is a transaction with such an entity, so Gamma is exempt from the full disclosure requirements for it. The standard still requires some information about the nature and amount of the dealings.
The director is key management personnel of Gamma, not a government body. The government exemption does not cover this loan.
The loan of ₹20,00,000 and any outstanding balance must be disclosed as a related party transaction in the normal way.

Answer: The ₹3,00,00,000 electricity purchase falls under the government-related entity exemption from full disclosure, though the standard still requires some information about it. The ₹20,00,000 loan to the director is outside the exemption and is disclosed in full.

Exam tips

Begin every theory answer with the objective in one sentence, then scope, then exemptions. This is the order examiners expect.
In cases, always ask first whether the statements are consolidated or separate. Many MCQ traps depend on this.
For exemption questions, quote the condition: control, joint control or significant influence by the government.
Mention commitments and balances as well as transactions to pick up the full scope marks.
For a 'why' question, link transparency to the possibility that terms are not arm's length.

Practice questions from Ind AS 24 Related Party Disclosures

Objective, Scope and Purpose of Ind AS 24: frequently asked questions

What is the main objective of Ind AS 24?

It is to ensure financial statements draw attention to the possible effect of related party relationships, transactions, outstanding balances and commitments on the entity's financial position and profit or loss. It helps users judge whether dealings were on normal terms.

Are intragroup transactions disclosed under Ind AS 24?

In consolidated statements they are eliminated, so no related party disclosure is needed for them. In the separate financial statements of the parent and subsidiaries they are disclosed.

Who gets the government-related entity exemption?

A reporting entity controlled, jointly controlled or significantly influenced by a government is exempt from full disclosure of dealings with that government and with other entities related through the same government. Some information about those dealings is still required.

Is a related party relationship disclosed if there were no transactions?

Yes for parent-subsidiary relationships. The entity discloses the relationship and the name of its parent, and of the ultimate controlling party if different, even without transactions.