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CA Intermediate · Advanced Accounting · AS 18 Related Party Disclosures

Under AS 18, which of the following pairs of parties will be regarded as related parties?

A company and its key management personnel such as Mr Rao form related parties. AS 18 specifically covers persons having authority and responsibility for planning, directing and controlling the activities of the enterprise. Common lenders, trade unions and regulators are not related parties merely because of their normal dealings.

  1. ATwo companies that have a common bank as their lender and nothing else in common
  2. BA company and a trade union with which it negotiates wages
  3. CA company and its key management personnel, Mr Rao, who is a director with authority to plan and control its activitiesCorrect
  4. DA company and a government department that merely regulates it

Explanation

AS 18 lists key management personnel and their relatives as related parties. Mere financing by a common lender, dealings with trade unions, or regulation by government departments do not by themselves create a related party relationship under the standard.

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