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F2: Advanced Financial Reporting

CHAPTER 11 – RELATED PARTIES

11.1 Which of the following transactions would NOT be disclosed as a related
party transaction under IAS 24 Related party disclosures?

A A sale of inventory for free to the daughter of a company’s chief executive.

B A sale of an asset by Company Z to Company Y at fair value. Company Y
is controlled by the partner of the chief executive of Company Z.

C A loan was received at a favourable rate by an associate from its parent
company.

D A loan was granted to the main supplier of a company.

11.2 Which of the following best describes the objectives of disclosing related
party transactions per IAS 24?

A Related party transactions are illegal. Disclosure will highlight to
shareholders whether the directors of an entity are abusing their position
of authority to enter into illegal transactions.

B A related party relationship could have an effect on the profit or loss and
financial position of an entity. Related parties may enter into transactions
that unrelated parties would not. Disclosure of these transactions will
enhance the understanding of the users of the financial statements
regarding an entity’s performance and position.

C It is important that the users of the accounts understand who the main
suppliers, customers, financiers and trade unions are. Disclosure of
transactions with these entities will provide greater insight into the financial
performance and position of an entity.

D Related party transactions need to be disclosed to enable users to
quantify the level of intergroup transactions that will have been recorded
within the group profit or loss and the group statement of financial position.

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