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CA Intermediate · Advanced Accounting · AS 18 Related Party Disclosures

Mr Raghav Mehta is a director of Sunrise Ltd. His son, Arjun, owns 100% of Arjun Traders. During the year Sunrise Ltd sold goods of ₹12,00,000 to Arjun Traders. As per AS 18, which statement is correct?

Arjun Traders is a related party of Sunrise Ltd, since a relative (son) of key management personnel controls it. AS 18 requires disclosure of the ₹12,00,000 sale regardless of whether prices were at arm's length.

  1. AArjun Traders is a related party only if Raghav Mehta holds shares in it
  2. BArjun Traders is a related party only if the sales were at non-arm's length prices
  3. CArjun Traders is a related party because it is an enterprise over which a relative of key management personnel has control, so the transaction must be disclosedCorrect
  4. DNo disclosure is needed because a son is not a relative under AS 18

Explanation

AS 18 treats enterprises over which a key management personnel or a relative of such personnel can exercise significant influence or control as related parties. A son is a relative under AS 18, and Arjun controls his firm. Related party status does not depend on pricing, so the ₹12,00,000 sale is disclosed.

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