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

Orchid Retail Ltd. has the following transactions with the same related party during the year: purchases of Rs 40 lakh of goods, a deputation of staff costing Rs 12 lakh, and a loan of Rs 25 lakh. A finance team member proposes to present a single line 'Total related party transactions Rs 77 lakh'. Ind AS 24 includes additional clarificatory guidance in paragraph 24A on aggregation of transactions. Which view best fits the standard's purpose in paragraph 8, that users assess risks and opportunities from transactions, balances and relationships?

Similar items may be aggregated, but dissimilar transactions such as purchases, deputation and loans should be disclosed separately. A single total of Rs 77 lakh would obscure information users need to assess risks and opportunities, which is the purpose of related party disclosure.

  1. AAggregation of all items of dissimilar nature into one total is appropriate
  2. BOnly the loan needs disclosure because it creates a balance
  3. CItems of a similar nature may be aggregated, but dissimilar transactions should be disclosed separately so users can assess their effectCorrect
  4. DAggregation is prohibited, so each individual invoice must be listed

Explanation

Aggregation is allowed only for items of a similar nature, unless separate disclosure is necessary to understand the effect on the financial statements. Purchases, deputation and loans differ in nature, so one total of Rs 77 lakh (40+12+25) hides information users need. Prohibiting all aggregation is too strict.

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