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Hello
I am aware that related party transactions should be disclosed in the notes. Also that they should be arms length transactions so as to not have a negative impact on shareholders.My question is , what happens if these transactions to related parties are not at armslength , how is that disclosed? Is it simply disclosed that a sale has been made to mr x , a related party at an amount less than market value?
If you think for a moment, you’ll realise that disclosure requirements are there in order to give full and transparent information to the stakeholders that may look at, or use, the financial statements
So, bearing that in mind, we can work of the principle that more is better even though it may not necessarily be a requirement
I can’t see anything in the IAS about being required to disclose that a transaction is below arm’s length but we do have this in paragraph 24:
“A statement that related party transactions were made on terms equivalent to those that prevail in arm’s length transactions should be made only if such terms can be substantiated.”
Does that help?
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