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

Himalaya Foods Ltd controls Nilgiri Beverages Ltd. During the year there were no transactions between the two companies. The CFO believes no disclosure about Nilgiri is needed in Himalaya's financial statements because nothing was transacted. Based on Ind AS 24, which statement is most appropriate?

Himalaya Foods must still disclose the control relationship with Nilgiri Beverages. Ind AS 24 requires relationship disclosure where control exists, since relationships with related parties, not just transactions, may affect users' assessment of the entity's risks and opportunities. No transactions during the year does not remove this requirement.

  1. ANo disclosure is needed, since disclosure arises only when transactions occur
  2. BRelationship disclosure is required where control exists, even when there have been no transactions, because knowledge of relationships may affect users' assessmentsCorrect
  3. CDisclosure is required only if the balance sheet carries an outstanding balance
  4. DDisclosure is needed only for the parent and not for the entity it controls

Explanation

Ind AS 24 (modified paragraph 14) explains the rationale for disclosing the related party relationship when control exists. Paragraph 8 notes that relationships with related parties, as well as transactions and balances, may affect users' assessments of risks and opportunities. Hence the absence of transactions does not remove the disclosure of the relationship.

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