IASB September 2006

The Board tentatively decided that when an entity qualifies as a related party of another entity simply because of the existence of common control from the State, IAS 24 should provide relief from the requirement to disclose related party transactions between those two commonly controlled entities. However, there are some situations in which disclosures should be made because of the nature of relationship that exists. The Board tentatively decided that IAS 24 should contain indicators that would require the relationship to be disclosed under IAS 24. The indicators would include:

• the existence of compulsion by the State for the entity to act in a particular way
• the existence of transactions at non-market rates between the two entities
• board members in common
• the use of shared resources
• economically significant transactions.

The Board tentatively decided that the entity should disclose that it is not aware of the existence of any indicators that would require the disclosure of other related party transactions.

The Board also tentatively decided to amend the definition of a related party transaction to remove the confusion over its translation and interpretation. The Board noted that the definition can be interpreted to mean transactions between two of an entity’s related parties. The Board tentatively decided that the definition should be clarified to mean transactions between the entity and its related parties.