Skip to content

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

Kaveri Pharma Ltd has sent several of its engineers to its subsidiary, Kaveri Devices Ltd, on deputation under an arrangement where Kaveri Devices reimburses their costs. The finance head believes this is a mere HR matter and not a related party transaction. How does Ind AS 24 treat it?

The deputation arrangement is a related party transaction. Ind AS 24 specifically adds management contracts, including those for deputation of employees, to its examples of related party transactions. The parent and subsidiary are related parties, so the arrangement must be disclosed regardless of the engineers' status or reimbursement amount.

  1. AIt is not a related party transaction because no goods or services are sold
  2. BIt is a related party transaction only if the engineers are key management personnel
  3. CIt is a related party transaction only if the reimbursement exceeds the engineers' actual salary cost
  4. DManagement contracts, including those for deputation of employees, are included among examples of related party transactions, so it is disclosedCorrect

Explanation

Ind AS 24 adds to the list of examples in paragraph 21 the item 'management contracts including for deputation of employees', which is not in IAS 24. Hence the deputation arrangement between a parent and subsidiary is a related party transaction. The KMP and cost-excess conditions are not in the standard.

Did you get it right without looking?

One question tells you little. A timed set on Ind AS 24 Related Party Disclosures shows your real accuracy, how long you take and where you lose marks.

Practise Ind AS 24 Related Party DisclosuresFree diagnostic mock

More Ind AS 24 Related Party Disclosures questions