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

Kaveri Engineering Ltd deputes some of its employees to its associate, Narmada Power Ltd, under a contract where Narmada reimburses the salary cost. The accountant of Kaveri says this is only a staff arrangement and need not be considered for related party disclosures. Which view is consistent with Ind AS 24 as notified in India?

The deputation arrangement is a related party transaction to be considered for disclosure. Ind AS 24 adds management contracts, including those for deputation of employees, to the examples of related party transactions in paragraph 21, so the accountant's view that it is merely a staff arrangement is incorrect.

  1. AIt is not a related party transaction because no goods are sold
  2. BIt is disclosable only if the reimbursement exceeds the salary cost
  3. CManagement contracts including for deputation of employees are an example of related party transactions to be considered for disclosureCorrect
  4. DIt is disclosable only in Narmada's books, not in Kaveri's books

Explanation

The Ind AS 24 comparison note records that paragraph 21 has been expanded in Ind AS 24 to add the example '(k) management contracts including for deputation of employees'. So the arrangement is a related party transaction for disclosure. The view that only goods sales count is wrong.

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