Introduction : In era where technology as substantially replaced the usage of man-power; our portal provides service where on the basis of raw data our experts will ensure complete maintenance of books of accounts, which in turn will allow the assessee to focus on his main business.In part 1 we have discussed who will be treated as related party and other questions relating to Ind-As 24; in part-2 we will analyze the remaining portion of Ind-As 24.
Which are the parties that will not be treated as related parties?
Whether there is any exemption to government related entity?
An entity who is preparing financial statement (being referred as reporting entity) will be exempted from the disclosure requirement in relation to
- related party transactions (ii) outstanding balances and (iii) commitments
- in relation to transaction with government that has control, joint control or significant influence over such entity.
- and with any other entity which is related party only due to same government has control, joint control or significant influence over that other entity.
But still reporting entity is liable to disclose (a) the name of the government; (b) the nature of the government’s relationship with the entity (i.e., whether the government has control, joint control or significant influence over the entity) (c) Any significant transaction that has impact on decision of user of financial statement.
- R is director in XYZ limited and he is also managing director in FRD limited; whether both the companies are to be treated as related party?
No, as specific exemption is given, both the companies will not be treated as related party.
- SB Ltd. is subsidiary of R Ltd.; R Ltd has also three more subsidiaries namely J Ltd. T Ltd. and S Ltd.; In S Ltd. there is one director named Mr. Shiv who is also Key Managerial person in R Ltd.; S Ltd. is holding company of UB Ltd. S Ltd. has D Ltd as its associate company. Which are the parties that will be treated as related parties from separate financial statement point of view.
From prospective of R Ltd., SB Ltd., J Ltd., T Ltd., S Ltd., every entity will be treated as related party including D Ltd. and UB Ltd.
From prospective of UB Ltd. also all the parties will be treated as related parties.
From Prospective of D Ltd. all the parties will be treated as related party; only thing that is important to note here is if in case there was any other associate of S Ltd. than in such case it will not be treated as related part of D Ltd.
In same manner is D. Ltd is holding company of any other company (i.e., other company is subsidiary company of D Ltd.) the same would be treated as related party however, if he has any associate company than same will not be treated as related party of any of above entity.
From above it is clear that how government has tried to covered maximum entities to provide better transparency to the user of financial statement.