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CA Final · Financial Reporting · Ind AS 24 Related Party Disclosures

Himalaya Engineering Ltd's financial statements are being reviewed by its audit committee. A member asks why the standard requires disclosure of related party transactions, outstanding balances, commitments and relationships. Which statement reflects the purpose stated in Ind AS 24?

Ind AS 24 requires these disclosures because knowing about transactions, outstanding balances including commitments, and relationships with related parties may affect users' assessments of the entity's operations, including the risks and opportunities it faces. It neither prescribes pricing nor substitutes for consolidation.

  1. AKnowledge of these items may affect users' assessments of the entity's operations, including the risks and opportunities it facesCorrect
  2. BThe disclosures are meant to fix the price at which related party transactions must be carried out
  3. CThe disclosures are required only so that the tax authorities can verify transfer prices
  4. DThe disclosures replace the need to consolidate subsidiaries in the financial statements

Explanation

Paragraph 8 states that knowledge of transactions, outstanding balances including commitments, and relationships with related parties may affect assessments of operations by users, including assessments of risks and opportunities. The standard does not prescribe pricing, serve tax verification, or replace consolidation. The other options therefore misstate its purpose.

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