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ACCA Strategic Professional · Strategic Business Reporting (International) · Other reporting issues

Alder plc owns 100% of Birch Ltd. Both are included in Alder's consolidated financial statements. Birch sold goods to Alder during the year. Which statement about IAS 24 disclosure is correct?

Intragroup transactions are eliminated on consolidation, so they are not disclosed as related party transactions in the consolidated statements. They are still disclosed in the subsidiary's own separate financial statements, because IAS 24 applies to each entity's individual statements, where the related party relationship exists.

  1. AThe transactions with Birch must be disclosed in the consolidated financial statements as related party transactions
  2. BThe intragroup transactions are eliminated on consolidation and are not disclosed in the consolidated financial statements, but are disclosed in Birch's separate financial statementsCorrect
  3. CThe transactions are disclosed only in Alder's consolidated financial statements because Alder is the parent
  4. DThe transactions are exempt from disclosure in every set of financial statements because the entities are under common control

Explanation

Intragroup transactions are eliminated in the consolidated statements, so IAS 24 disclosure is not needed there. In the separate or individual financial statements of Birch (and Alder), the transactions with a related party remain disclosable. The suggestion that they must be disclosed in the consolidated statements ignores the elimination.

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