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CA Intermediate · Advanced Accounting · AS 18 Related Party Disclosures

Mr. Desai is a director of Kiran Ltd. and also holds 35% voting power in Lotus Pvt. Ltd., which sold machinery for ₹22,00,000 to Kiran Ltd. The transaction was at market price. Which statement is correct as per AS 18?

Lotus Pvt. Ltd. is a related party because a director of Kiran Ltd. holds 35% voting power in it. The ₹22,00,000 purchase must be disclosed with the nature of relationship, even though it was at market price.

  1. ADisclosure is not required since the transaction was at market price
  2. BDisclosure is required only if Kiran Ltd. is a listed company
  3. CLotus Pvt. Ltd. is a related party of Kiran Ltd. and the purchase must be disclosed, with the nature of relationship and amount, even though it was at arm's lengthCorrect
  4. DDisclosure is required only if Mr. Desai personally received a payment

Explanation

Mr. Desai is KMP, and holding 35% voting power gives him significant influence over Lotus, so Lotus is a related party. AS 18 requires disclosure irrespective of whether pricing is at market. Listing status and personal receipt are irrelevant.

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