CA Final · Financial Reporting · Ind AS 24 Related Party Disclosures
Kaveri Ltd's annual report includes a note on related parties. The audit committee asks why Ind AS 24 requires information on outstanding balances, commitments and relationships, rather than only transactions. Which answer best reflects the purpose stated in paragraph 8 of Ind AS 24?
Ind AS 24 paragraph 8 says that knowing an entity's transactions, outstanding balances including commitments, and relationships with related parties may affect how users assess its operations, including the risks and opportunities it faces. That is why balances and relationships are disclosed along with transactions.
- ABecause such knowledge may affect users' assessments of the entity's operations, including the risks and opportunities it facesCorrect
- BBecause the standard aims to restrict the entity from dealing with related parties
- CBecause outstanding balances must be measured at fair value in all cases
- DBecause tax authorities require the figures to compute arm's length prices
Explanation
Paragraph 8 states that knowledge of an entity's transactions, outstanding balances including commitments, and relationships with related parties may affect assessments of its operations by users, including assessments of risks and opportunities. The fair value option is wrong because the paragraph states no measurement rule, and the standard does not restrict dealings.
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