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Hi sir,
In Question 2, the answers determined the entity that the finance director has jointly control as related party as follow: “The director is a member of the key management personnel of the reporting entity and the entity from whom the goods were purchased is jointly controlled by that director. Therefore a related party relationship exists and should be disclosed”
But in the IAS 24 has mentioned:
The following are not related parties (IAS 24: para. 11):
(a) Two entities simply because they have a director or other member of key management
personnel in common, or because a member of key management personnel of one entity has
significant influence over the other entity;Could you please clarify whether two entities which have the same director or key management are related party or not?
Thank sir,
If a company is very large and has 10 directors then one director on their own cannot really exercise control. So simply being a director of two very large companies would not automatically make them related parties.
If the company is smaller a related party relationship may exist. It is a judgement call.
In the exam there is no harm in saying that there may be a related party relationship in which case transactions should be disclosed.
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