Task ? 5 Specification: Undertaking “A” is a commercial entity that produces the

Question

Task ? 5

Specification:

Undertaking “A” is a commercial entity that produces the financial statements in accordance with IFRS. Its director is appointed by ordinance of Director of the parent undertaking. A undertaking director is involved in decision-making process (approval of budget, contractual terms and conditions) however the final approval is required on behalf of Director of the parent undertaking to make decisions.

Question:

Should undertaking “A” disclose director as the related party, if his decisions require approval of the Director of the parent undertaking?

Explanation / Answer

Related Party Disclosures requires disclosures about transactions and outstanding balances with an entity's related parties. The standard defines various classes of entities and people as related parties and sets out the disclosures required in respect of those parties, including the compensation of key management personnel.

A related party is a person or entity that is related to the entity that is preparing its financial statements

A person or a close member of that person's family is related to a reporting entity if that person:

undertaking A should disclose it as a related party transaction

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