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

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?

Expert Solution

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:

(i) has control or joint control over the reporting entity;
(ii) has significant influence over the reporting entity; or
(iii) is a member of the key management personnel of the reporting entity or of a parent of the reporting entity.
A related party transaction is a transfer of resources, services, or obligations between related parties, regardless of whether a price is charged
Regardless of whether there have been transactions between a parent and a subsidiary, an entity must disclose the name of its parent and, if different, the ultimate controlling party. If neither the entity's parent nor the ultimate controlling party produces financial statements available for public use, the name of the next most senior parent that does so must also be disclosed.
from the above information it is clear that they have to disclose it as a related party transaction

undertaking A should disclose it as a related party transaction

ekkarill92 answered 1 year ago

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