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

Which of the following parties is, by itself, a related party of Kestrel plc under IAS 24?

An associate of Kestrel's parent is a related party of Kestrel, because the parent has significant influence over it and the parent is related to Kestrel. A lender, a major customer or a tax authority is not related merely through normal business dealings or economic dependence.

  1. AA bank that provides Kestrel with a major loan facility and so has economic dependence on it
  2. BA customer that accounts for 40% of Kestrel's sales
  3. CAn associate of Kestrel's parent company, where Kestrel's parent has significant influenceCorrect
  4. DA government department that merely levies taxes on Kestrel

Explanation

An entity is related if it and the reporting entity are members of the same group; an associate of the parent is related to the parent's other group members only through significant influence of the parent, which makes it a related party of Kestrel as a fellow associate-type entity under IAS 24's definition. Lenders, customers and tax authorities do not become related parties merely through normal dealings or economic dependence.

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