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

Orion Group's parent, Titan Holdings, is controlled by Mr Rao. Orion sold a property to Mr Rao's brother-in-law's company, Delta Ltd, for $5m, when its fair value was $7m. Mr Rao does not control or jointly control Delta, and has no significant influence over it. The brother-in-law is not close family under IAS 24 unless he may influence or be influenced by Mr Rao. Orion's finance director argues no disclosure is needed. Which view is most consistent with IAS 24 and good reporting ethics?

Close family under IAS 24 depends on whether the person may influence or be influenced by the individual, not on a fixed relationship. The sale at $2m below fair value is a warning sign, so Orion should assess and probably disclose it; hiding it would breach professional ethics.

1. ANo disclosure, because a brother-in-law is never close family under IAS 24
2. BDisclosure is required automatically, because every transaction at below fair value is a related party transaction
3. CDisclosure is not needed, as IAS 24 only covers transactions at fair value
4. DJudgement is needed on whether the brother-in-law is a close family member who may influence or be influenced by Mr Rao; the undervalue and circumstances suggest it should be assessed and likely disclosed, and concealment would be unethicalCorrect