Advanced Accounting · AS 18 Related Party Disclosures

Disclosure Requirements under AS 18 (Related Party Disclosures)

Updated 4 October 2026 · Fact-checked

AS 18 disclosure requires you to report related party relationships and transactions in the financial statements. Disclose names, the nature of the relationship, transaction types, volumes, outstanding balances, provisions for doubtful debts and write-offs. Control relationships are disclosed even if no transactions took place. Similar items may be aggregated by type.

Understand Disclosure Requirements under AS 18

A related party can influence how a business deals with others. Transactions with such parties may not be at arm's length. So the reader of the financial statements needs to know who the related parties are and what passed between them. AS 18 achieves this through disclosure. It does not tell you how to measure the transactions.

There are two kinds of disclosure. The first is about relationships. Relationship disclosure applies only where control exists, whether or not any transaction took place. This covers parent-subsidiary relationships and any party that controls or is controlled by the reporting enterprise. The second is about transactions. Other related parties, such as associates, fellow subsidiaries and key management personnel, are disclosed in the context of transactions. If there were transactions with them during the period, you disclose them.

For transactions, AS 18 asks for the name of the transacting related party, the description of the relationship, a description of the transactions, the volume of transactions (as an amount or an appropriate proportion), the amounts or appropriate proportions of outstanding items, provisions for doubtful debts due from related parties at the balance sheet date, and amounts written off or written back in the period for debts due from or to related parties. Disclosure is made by type of related party (for example holding company, subsidiaries, associates, key management personnel). The types are illustrative, not a fixed prescribed list.

Items of a similar nature may be disclosed in aggregate, except where separate disclosure is needed to understand the effect on the financial statements. AS 18 does not require disclosure of intra-group transactions in consolidated financial statements, because they are eliminated. A state-controlled enterprise need not disclose related party relationships or transactions with other state-controlled enterprises. Also, a statement that transactions were at arm's length should be made only if it can be substantiated.

One point trips many students. Merely by virtue of normal dealings, the following are not related parties: providers of finance, trade unions, public utilities, and government departments and agencies. The same applies to a single customer, supplier, franchisor, distributor or general agent with whom significant business is done. The exception is where the party meets the control or significant influence tests. Check the relationship first, then disclose.

Key rules to remember

Control relationship disclosure: Control exists → disclose name and relationship, with or without transactions; Applies to parent-subsidiary relationships and to any party that controls or is controlled by the reporting enterprise. Disclose the name of the related party and the relationship, even if no transactions occurred.
Transaction disclosure (if transactions occurred): Name + nature of relationship + nature of transactions + volume + outstanding balances + provisions + write-offs/write-backs; Give these for each type of related party. Volume can be an amount or an appropriate proportion.
Aggregation rule: Similar items → may be aggregated by type of related party; Do not aggregate where separate disclosure is needed to understand the effect on the financial statements.
Types of related party: Holding company, subsidiaries, fellow subsidiaries, associates, joint ventures, key management personnel, relatives of key management personnel; Disclosure is made by type of related party. This list is illustrative, not a prescribed list of heads.
Exemptions: Consolidated statements: eliminated intra-group items need no disclosure; state-controlled enterprises: no disclosure of relationships or transactions with other state-controlled enterprises; Not all transactions with a related party are exempt. The exemptions are narrow.

How to solve Disclosure Requirements under AS 18 questions

Use the same sequence for any AS 18 disclosure question. It stops you from missing marks on relationships you forgot to test.

1List every party in the question and test each against AS 18 definitions: control, significant influence, key management personnel, relatives.
2Discard parties that are not related, such as ordinary suppliers, banks or customers with no control or influence.
3Group the related parties by type, for example holding company, subsidiary, fellow subsidiary, associate, joint venture, key management personnel, relatives. The types are illustrative, not a fixed list.
4Separate control relationships (parent-subsidiary, or any party controlling or controlled by the reporting enterprise), whose relationship you disclose always, from other related parties, which you disclose in the context of transactions that occurred.
5For each type, list name, relationship, nature and volume of transactions, and outstanding balances at the balance sheet date.
6Add provisions for doubtful debts and amounts written off or written back, if any are given.
7Aggregate similar items where permitted, and write a neat table-like disclosure with a short note on exemptions applied.
8Re-read the question to check no related party is missed and no non-related party is shown.

Quickest way: Relationship first, then transactions

When to use it: Use this when time is short, in both MCQs and written practical questions.

MCQ: ask only two things. Is there control? Were there transactions? Where control exists (of or by the reporting enterprise), disclose the relationship regardless. Other related parties are disclosed in the context of transactions, so with no transactions there is no transaction disclosure for them.
MCQ: eliminate options that say disclosure is needed only when transactions are material or only for the parent. These overstate or understate the rule.
Written: use a fixed layout. Heading, list of related parties with relationship, then a table of transactions by type of party, then balances.
Written: always add one line on why a party is excluded (for example, only a supplier). Examiners give step marks for this.
Write amounts in rupees and show totals by type of party so the marker can verify quickly.

Common mistakes in Disclosure Requirements under AS 18

Saying no disclosure is needed when there were no transactions.
Students link disclosure only with transactions.
Fix: Remember that control relationships must be disclosed even when no transactions took place.
Treating a major supplier, customer or bank as a related party.
Heavy dependence looks like influence.
Fix: Ordinary dealings or dependence alone do not make a party related. Look for control, significant influence or key management personnel links.
Omitting outstanding balances, provisions and write-offs.
Students stop after listing the transactions.
Fix: Use the full checklist: names, relationship, nature, volume, outstanding amounts, provisions for doubtful debts, write-offs and write-backs.
Aggregating all transactions together into one total.
Aggregation is mistaken for a general permission.
Fix: Aggregate only similar items and only by type of related party. Do not combine different types or hide items that need separate disclosure.
Disclosing intra-group eliminated transactions in consolidated statements.
Students forget that eliminated items vanish on consolidation.
Fix: In consolidated financial statements, intra-group transactions that are eliminated need not be disclosed.
Stating that transactions were at arm's length without basis.
It sounds like a safe closing line.
Fix: Make that statement only if it can be substantiated.

Worked examples

Example 1

X Ltd holds 70% of Y Ltd. During the year X Ltd sold goods of ₹40,00,000 to Y Ltd and ₹5,00,000 was outstanding at year end. X Ltd also bought goods of ₹6,00,000 from Z Ltd, an unrelated supplier. Z Ltd has no link with X Ltd. Show the disclosure in the separate financial statements of X Ltd.

Show the solution

Test the parties. Y Ltd is controlled by X Ltd, so it is a related party (subsidiary). Z Ltd is an unrelated supplier, so it is excluded.
Control relationship: disclose the name of Y Ltd and the relationship (subsidiary) in X Ltd's statements.
Transactions: sales of goods to Y Ltd ₹40,00,000.
Outstanding balance due from Y Ltd at year end: ₹5,00,000.
No provision for doubtful debts or write-off is given, so none is disclosed.
Purchases of ₹6,00,000 from Z Ltd are not disclosed under AS 18.

Answer: Disclose under 'Subsidiary': Y Ltd, relationship subsidiary (70% held), sales of goods ₹40,00,000, amount receivable ₹5,00,000. Z Ltd purchases are not related party transactions.

Example 2

P Ltd has a subsidiary S Ltd and an associate A Ltd. In the year P Ltd had no transactions with S Ltd. It sold goods of ₹8,00,000 and ₹3,00,000 to A Ltd in two lots. Of the amount receivable for these goods, ₹4,00,000 was outstanding from A Ltd at year end. P Ltd had also advanced a loan to A Ltd earlier. A Ltd repaid ₹2,00,000 of the loan during the year, and ₹5,00,000 of the loan remained outstanding at year end. A provision of ₹50,000 was made for doubtful debts on the ₹4,00,000 receivable for goods. What must P Ltd disclose?

Show the solution

S Ltd is controlled by P Ltd, so the relationship is disclosed even though there were no transactions.
A Ltd is an associate (significant influence), so it is related. Transactions occurred, so disclose them.
Sales to A Ltd: ₹8,00,000 + ₹3,00,000 = ₹11,00,000. These are similar items and may be aggregated under 'Associates'.
Loan repayment received from A Ltd ₹2,00,000 is a different type of transaction, so show it separately from sales.
Outstanding balances due from A Ltd at year end: receivable for goods ₹4,00,000 and loan ₹5,00,000. Show them separately.
Provision for doubtful debts on the ₹4,00,000 receivable for goods: ₹50,000.

Answer: Disclose S Ltd as a subsidiary (relationship only, no transactions). Under associates, disclose A Ltd with sales ₹11,00,000, loan repayment received ₹2,00,000, outstanding receivable for goods ₹4,00,000, outstanding loan ₹5,00,000 and provision for doubtful debts ₹50,000.

Exam tips

Practical questions often hide related parties inside the narrative. Underline every party and test each one before writing.
Write control relationships first and state clearly that they are disclosed even with no transactions.
Group your answer by type of related party and keep a neat layout. Step marks come from the checklist items.
Show a brief reason for excluding any party, such as an ordinary supplier or customer.
In MCQs, watch for options that add conditions such as materiality thresholds or arm's length claims that AS 18 does not impose.

Practice questions from AS 18 Related Party Disclosures

Disclosure Requirements under AS 18 in other exams

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

Disclosure Requirements under AS 18: frequently asked questions

Is disclosure required under AS 18 when there are no related party transactions?

Yes, for control relationships. You must disclose the name and nature of the relationship where control exists, such as parent and subsidiary or any party controlling or controlled by the reporting enterprise, even if no transactions took place. Other related parties are disclosed in the context of transactions, so their disclosures arise only when transactions occurred.

Can related party transactions be aggregated?

Yes, items of a similar nature may be disclosed in aggregate by type of related party. Do not aggregate where separate disclosure is necessary to understand the effect on the financial statements.

What should be disclosed about outstanding balances?

Disclose the amounts or appropriate proportions of outstanding items at the balance sheet date. Also disclose provisions for doubtful debts due from related parties and amounts written off or written back in the period.

Are intra-group transactions disclosed in consolidated financial statements?

No, not where they are eliminated on consolidation. AS 18 does not require disclosure of such eliminated intra-group transactions in the consolidated statements. Separately, a state-controlled enterprise need not disclose related party relationships or transactions with other state-controlled enterprises.

Is a key supplier or lender a related party?

Not merely because of the dealing or dependence. Providers of finance and a single supplier or customer with whom significant business is done are not related parties by virtue of those dealings alone. A party is related only if it meets the AS 18 tests such as control, significant influence, or key management personnel and their relatives.