As per IAS 24, which of the above mentioned transactions would be disclosed as related party transactions?

Question

Creative ltd. is a maker of spare parts for automobiles. Company executes its business through a business model that has functioned for quite a long time and has made the organization a successful business, which is ranked among top 20 business enterprises of its field by the business community. Creative ltd. has confidence in working with trustworthy and responsible vendors/dealers furthermore; it offers its products only to the enterprises that it can either control or practice ‘significant influence’ over. The details regarding business dealings are as follows:  Creative ltd. buys the raw material from Decent ltd, that is a reliable supplier. Because of the facts that Decent ltd. has always provided the required material of higher standards since last 5 years, that’s why Creative ltd. has never purchased anything from any other supplier. So, it can be said that Decent ltd is economically dependent on Creative ltd. Creative ltd. sells 60% of its production to an enterprise that is owned by a director of Creative ltd and the remaining portion of the output to a company that is its "associate" as Creative ltd. possesses 25% of the share capital of that organization. Creative ltd. stores its stock in a storeroom that is taken on lease from the spouse of its director. The lease rentals are decided at an arm’s length price. Creative ltd. has granted a loan without interest to the company XYZ ltd. that is owned by the CEO of Creative ltd. the purpose of loan is to buy the delivery vans which the XYZ ltd. is utilizing for delivering the goods from the distribution center of the supplier to the warehouse utilized by Creative ltd. for storing its stock.

Answer 1

IAS 24 defines a related party to include an entity’s subsidiaries, associates, joint venture interests, key management and close family members of key management.

The standard requires an entity’s transactions with related parties, regardless of whether a price is charged, to be disclosed in that entity’s financial statements

According to IAS 24 following would be considered as Related Party Transactions.Hence require disclosure.

1.60% sells to enterprise owned by a director of creative Ltd

2.Remaining sales to company which is associate of Creative ltd in which creative Ltd possesses 25% of share capital.

3.Transaction with Spouse of Director.

4. XYZ Ltd which is owned by CEO of Creative ltd to whom it has given interest free loan.