A look at the standards for transactions with related parties

In order to be awarded CPD units you must answer the following five random questions correctly. If you fail the test, please re-read the article before attempting the questions again.

  1. Related party relationships are a natural feature of business activity and their disclosure is an important aspect of corporate governance. Which of the following is not a reason for disclosing related party relationships?

  2. The UNCTAD guidance on good corporate governance recognises that disclosure of related party transactions and any related party relationships where control exists should be disclosed as well as disclosure of the decision- making process for approving related party transactions. IAS 24 Related Party Disclosures (2009) sets out the scope of related party disclosures. To what aspect of related party transactions does IAS 24 not apply?

  3. A related party can be a person or an entity. Therefore the standard separates the definition of a related party into two parts. Which of the following is not a related party?

  4. IAS 24 does not specifically state whether a related party relationship should exist at the reporting date for the transactions to be reported. It is, therefore not apparent whether all related party events and transactions for the period should be disclosed. Which of the following statements is not a principle which has resulted from IAS 24?

  5. IAS 24 gives examples of situations where parties are not necessarily related. Which of the following relationships are deemed to be a related party?

  6. In formulating the definition of a related party, the International Accounting Standards Board (IASB) adopted a specific approach, which it outlined in the Basis for Conclusions. Which of the following principles was not used by the IASB in formulating IAS 24?

  7. Many accounting frauds have involved related party transactions and this has created concern amongst market participants about appropriate disclosures and the auditing of those transactions. Partially, as a result of these concerns, the Securities and Exchange Commission (SEC) has approved a Public Company Accounting Oversight Board (PCAOB) standard on auditing transactions with related parties. Which of the following changes has not occurred because of the SEC standard?

  8. Prior to the current standard, the definition of a related party in IAS 24 had been the subject of criticism because some believed that it was inherently inconsistent. What were the main changes brought about by the IASB in the revised IAS 24?

  9. IAS 24 contains no specific exemptions for intragroup transactions in consolidated financial statements. When intragroup transactions are eliminated, they are not part of the group financial statements and are therefore not disclosed under IAS 24. How have the amendments to accounting standards relating to investment entities affected IAS 24?

  10. A collection of amendments to IFRSs, in response to eight issues addressed during the 2010-2012 cycle were subsequently included in the exposure draft of proposed amendments to IFRSs. As a result in 2012, IAS 24 was amended. What was the amendment to IAS 24 set out in the Annual Improvements to IFRSs 2010-2012?