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CA Intermediate · Advanced Accounting · AS 18 Related Party Disclosures

Himalaya Tea Ltd, a company, is evaluating whether the following parties are 'related parties' under AS 18. Which one of them is NOT, merely by that relationship alone, treated as a related party of Himalaya Tea Ltd?

A bank giving a term loan in the normal course is not a related party solely due to that relationship. Subsidiaries, fellow subsidiaries and associates are related parties under AS 18 because of control, common control or significant influence, whereas a lender's dealings are ordinary financing arrangements.

  1. AA subsidiary of Himalaya Tea Ltd
  2. BAn associate of Himalaya Tea Ltd
  3. CA fellow subsidiary of Himalaya Tea Ltd
  4. DA bank that provides a term loan to Himalaya Tea Ltd in the normal courseCorrect

Explanation

AS 18 lists enterprises that directly or indirectly control, are controlled by, or are under common control with the reporting enterprise (subsidiaries, fellow subsidiaries) and associates as related parties. A lender such as a bank, in the normal course of its dealings, is not a related party merely because of the lending relationship.

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