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

Kaveri Engineering Ltd has sent several of its engineers on deputation to its associate, Godavari Power Ltd, under an arrangement where Godavari pays Kaveri for the services. Kaveri's finance head asks whether this arrangement falls within the examples of related party transactions in Ind AS 24. Which view is correct?

The deputation arrangement is a related party transaction. Ind AS 24 specifically includes management contracts, including for deputation of employees, among its examples of related party transactions, so it must be considered for disclosure by both the entities involved, regardless of whether goods are transferred.

  1. AIt is not a related party transaction because no goods are transferred
  2. BIt is a related party transaction only if the payment exceeds the cost of the engineers
  3. CIt is an example of a related party transaction, as management contracts including for deputation of employees are listed in Ind AS 24Correct
  4. DIt is a related party transaction only for Godavari and not for Kaveri

Explanation

Ind AS 24 adds to its list of examples of related party transactions 'management contracts including for deputation of employees' (paragraph 21(k)). The arrangement is therefore a related party transaction for both entities, and no price threshold or transfer of goods is required.

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