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ACCA Strategic Professional · Strategic Business Reporting (International) · Other reporting issues

Lumen Ltd is a subsidiary of Sol plc, which is wholly owned by the government of a country. Lumen buys electricity from a state-owned utility, also controlled by the same government, at normal tariff rates. Which statement reflects IAS 24's government-related entity exemption?

IAS 24 gives a partial exemption for transactions with the controlling government and entities controlled by it. Lumen need not give full details but must name the government, describe the relationship and disclose enough about significant transactions. The exemption does not remove disclosure of dealings with its own parent.

  1. ALumen is exempt from all related party disclosures with Sol plc
  2. BLumen need not give the full disclosures about the utility transactions but must disclose the name of the government and the nature of the relationship, and enough information about significant transactionsCorrect
  3. CLumen must disclose every transaction with the utility in full, since the exemption applies only to the government itself
  4. DLumen is exempt entirely because tariff rates are set by law

Explanation

IAS 24 gives a partial exemption for transactions with the controlling government and with other entities controlled by the same government. Lumen must still disclose the government's name, the nature of the relationship and, for individually or collectively significant transactions, their nature and extent. Dealings with its own parent Sol remain fully disclosable.

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