Skip to content

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

Himalaya Power Ltd has seconded several employees to its subsidiary, Himalaya Hydro Ltd, under an arrangement where Himalaya Hydro reimburses the salary cost. The finance head argues this is only an administrative matter and not a related party transaction. Which view is consistent with Ind AS 24 as notified in India?

The secondment is a related party transaction. Ind AS 24 added, as an example in paragraph 21, management contracts including for deputation of employees. The parent and subsidiary are related parties, so the arrangement is disclosable regardless of whether goods are sold or any profit arises.

  1. AIt is not a related party transaction because no goods or services are sold
  2. BIt is a related party transaction only if the reimbursement exceeds the cost of salary
  3. CIt need be disclosed only in the subsidiary's books and not in the parent's
  4. DIt is a related party transaction, because management contracts including for deputation of employees are listed as an example of related party transactionsCorrect

Explanation

The Ind AS version adds to the examples in paragraph 21 the item 'management contracts including for deputation or employees'. Hence deputation between parent and subsidiary is a related party transaction regardless of any profit element or which entity's books are considered. The view that only sales count is wrong because the examples go beyond sales.

Did you get it right without looking?

One question tells you little. A timed set on Ind AS 24 Related Party Disclosures shows your real accuracy, how long you take and where you lose marks.

Practise Ind AS 24 Related Party DisclosuresFree diagnostic mock

More Ind AS 24 Related Party Disclosures questions