IAS 24 Related Party Disclosures – Transparency in Connected Transactions
1️⃣ Introduction: Understanding IAS 24 Related Party Disclosures
IAS 24 Related Party Disclosures defines how companies identify and report relationships and transactions with related parties. The standard ensures that users of financial statements understand how a company’s results might be affected by those relationships.
In Singapore, where many businesses operate within group structures or share common directors, IAS 24 Related Party Disclosures enhances trust and compliance with ACRA and auditing requirements.
2️⃣ Purpose and Scope
IAS 24 applies to all reporting entities preparing financial statements under IFRS or Singapore FRS. It requires disclosure of relationships, transactions, and outstanding balances with:
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Parent entities and subsidiaries
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Fellow subsidiaries within a group
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Associates and joint ventures
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Key management personnel (KMP) and their close family members
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Entities controlled by KMP or their families
These disclosures allow users to assess whether the company’s financial position has been influenced by related-party relationships.
3️⃣ Definition of a Related Party
A related party is a person or entity that has control or significant influence over the reporting entity — or vice versa.
Examples:
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A shareholder owning more than 50 % of voting rights.
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A subsidiary or joint venture within the same group.
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A director who controls another company providing services to the group.
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Immediate family members of key management with financial transactions in the entity.
Therefore, identifying related parties is the first critical step toward accurate disclosure.
4️⃣ Types of Disclosures Required under IAS 24
IAS 24 Related Party Disclosures requires companies to disclose:
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Relationships: Names of the parent and ultimate controlling party.
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Transactions: Nature, volume, and terms of related-party transactions (e.g., sales, purchases, loans, management fees).
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Balances: Outstanding balances and provisions for doubtful debts.
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Compensation of key management personnel: Short-term benefits, post-employment benefits, share-based payments, and other long-term benefits.
As a result, investors and regulators gain clear insight into the extent of related-party influence.
5️⃣ Materiality and Arm’s Length Principle
Although IAS 24 does not prescribe specific monetary thresholds, entities should apply judgement and materiality principles. All disclosures must reflect whether transactions occurred at arm’s length — that is, under normal market conditions.
If not at arm’s length, the company must explain the terms and how they differ from standard commercial arrangements.
6️⃣ Disclosure Format and Examples
Typical disclosures under IAS 24 Related Party Disclosures include:
| Category | Description | Example |
|---|---|---|
| Parent entity | Disclosure of ultimate holding company | USAFE Holdings Pte. Ltd. owns 100 % of USAFE Accounting Pte. Ltd. |
| Subsidiary transactions | Intercompany sales or loans | Management fee charged to Vietnam subsidiary SGD 50 000 |
| KMP remuneration | Salary and bonuses | Total compensation of directors SGD 320 000 |
| Balances outstanding | Amounts due from related parties | Loan receivable SGD 80 000 – unsecured and interest-free |
These tables increase readability and transparency for auditors and investors.
7️⃣ Example: IAS 24 in Practice
Scenario:
uSafe Accounting Pte. Ltd. provides consulting services to Think Scope Pte. Ltd., a company controlled by one of its directors. During FY 2024, the total service fee was SGD 45 000. As of 31 December 2024, SGD 10 000 remained unpaid.
Under IAS 24 Related Party Disclosures, uSafe must reveal the relationship, nature of transaction, outstanding balance, and confirmation that terms were at arm’s length.
8️⃣ Common Errors
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Failing to identify all related parties (e.g., family relationships or associates).
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Omitting balances outstanding at period-end.
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Not disclosing management compensation separately.
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Using vague descriptions such as “transactions with related companies.”
Therefore, maintaining a clear register of related parties and performing annual updates is essential.
9️⃣ Best Practices for Compliance
✅ Maintain a related-party register updated every year.
✅ Obtain director and KMP declarations to identify new relationships.
✅ Review arm’s-length terms with supporting documentation.
✅ Disclose transactions transparently to enhance corporate governance.
By following these steps, firms build trust and reduce audit risks linked to related transactions.
🔟 Conclusion
IAS 24 Related Party Disclosures strengthens corporate transparency and ensures that financial statements reflect all connections influencing business decisions. For Singapore companies, this standard aligns with ACRA and ISCA expectations and reinforces the integrity of financial reporting in a closely connected market.
Disclaimer: This article is for informational purposes only and does not constitute any professional advice. Feel free to contact us to consult with our professional advisors team for personalized advice and guidance.
Sources: https://www.ifrs.org/issued-standards/list-of-standards/ias-24-related-party-disclosures/
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