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

Ind AS 24 explains why information about related party relationships and transactions is useful to users of financial statements. Which statement best reflects the stated purpose of such disclosures?

The disclosures exist because knowledge of related party transactions, outstanding balances including commitments, and relationships may affect users' assessments of the entity's operations, including the risks and opportunities it faces. They are not limited to tax or EPS purposes.

  1. AKnowledge of transactions, outstanding balances including commitments, and relationships with related parties may affect users' assessments of the entity's operations, including its risks and opportunitiesCorrect
  2. BThey are meant solely to enable tax authorities to reassess transfer prices of the entity
  3. CThey are meant to show that all related party transactions were at arm's length prices
  4. DThey are required only to compute consolidated earnings per share

Explanation

The standard's stated purpose is that knowledge of transactions, balances including commitments and relationships with related parties may affect assessments of operations, including risks and opportunities. It does not claim the disclosures prove arm's length pricing or serve only tax purposes.

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