IAS 24 — Related Party Disclosures

Hi Mr Mike!

I guess I will still bother you with my questions, even after becoming an ACCA member! 🙂

I have an inquiry regarding IAS 24 — Related Party Disclosures.

My client has four customers, one of these customers pays my client an amount of money in advance in order for my client to use it to cover their customer’s expenses. Please note that this is not the actual service provided by my client to this customer, the business between them is something different, you can think of it as a favour done by my client with nothing in return.

The question here is, how should we account for these transactions? Obviously non of these expenses should be recorded, but what about the remaining balance of the money provided, is it going to be shown as a normal payable balance (other payables since it is not business related) or is it a related party transaction? Which in a way I feel it is because the nature of the transaction is different, yet reading the related party standard, a client/customer isn’t really defined as related party, there is a mention of “a single client”, not sure if this applies here, this is not the single customer of my client though, however, it is one of the main four customers it has.

Identifying related party transactions is always tricky, I hope I can get an answer on my quirey.