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

Alpha plc's finance director, Ms Rao, owns 100% of Beta Ltd. During the year Alpha sold goods to Beta at normal commercial prices, and the balance is unpaid at the year-end. Under IAS 24, which statement is correct for Alpha's financial statements?

Beta is a related party of Alpha because it is controlled by Alpha's key management person. Transactions and outstanding balances must be disclosed under IAS 24, and normal commercial pricing does not remove the disclosure requirement.

  1. ABeta is a related party of Alpha because Ms Rao is key management personnel of Alpha and controls Beta, so the transactions and balances must be disclosedCorrect
  2. BNo disclosure is needed because the transactions were at normal commercial prices
  3. CBeta is not a related party because Ms Rao is only an employee of Alpha
  4. DDisclosure is needed only of the transaction value and not the outstanding balance

Explanation

An entity controlled by a member of the reporting entity's key management personnel is a related party. IAS 24 requires disclosure of transactions and outstanding balances regardless of whether prices are at arm's length. Option B is wrong because pricing does not remove the disclosure requirement.

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