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related parties

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBR Exams › related parties

  • This topic has 1 reply, 2 voices, and was last updated 9 months ago by Stephen Widberg.
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  • Author
    Posts
  • April 8, 2022 at 2:17 pm #652921
    shaunak22
    Participant
    • Topics: 217
    • Replies: 41
    • ☆☆☆

    one question from the BPP text was –

    On 1 July 20X9, RP sold a wholly owned subsidiary, X, a limited company, to Z, a public limited
    company. During the year RP supplied X with second-hand office equipment and X leased its
    factory from RP. The transactions were all contracted for at market rates.

    DOUBT –

    subsidiary and parent are considered to be related group so transaction between them should be disclosed right so here since the subsidiary is sold on 1st July any transaction upto 1st July should be shown right? In the answer given i the text they have told the opposite

    ANSWER GIVEN IN THE TEXT –

    IAS 24 does not require intragroup transactions and balances eliminated on consolidation to
    be disclosed. IAS 24 does not deal with the situation where an undertaking becomes, or
    ceases to be, a subsidiary during the year.

    Best practice indicates that related party transactions should be disclosed for the period when
    X was not part of the group. Transactions between RP and X should be disclosed between 1
    July 20X9 and 31 October 20X9 but transactions prior to 1 July will have been eliminated on
    consolidation.

    There is no related party relationship between RP and Z since it is a normal business
    transaction unless either party’s interests have been influenced or controlled in some way by
    the other party

    April 9, 2022 at 11:12 am #652943
    Stephen Widberg
    Keymaster
    • Topics: 11
    • Replies: 2837
    • ☆☆☆☆☆

    RPTs are always a judgement call, but here is my view:

    Before sale of subsidiary:

    Disclose RPT in PARENT accounts
    Do no disclose RPT in GROUP accounts (as the BPP answer says)

    After sale of the subsidiary

    No disclosure – unless there is some obscure rule I’ve never heard of.

    🙂

  • Author
    Posts
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