FAC3703
NOTES
,Related parties
Reporting entity must disclose transactions with related parties
A person or a close member of that person’s family is related to the reporting entity if
that person:
Has control or joint control over reporting entity
Has significant influence over the reporting entity =<20%
Is a member of key management personnel of the reporting entity or a parent
of the reporting entity
An entity is related to a reporting entity if any of the following conditions apply:
The entity and reporting entity are members of the same group e.g. fellow
subsidiaries
One entity is an associate or joint venture of the other entity
Both entities are joint ventures of the same third party
One entity is a joint venture of a third party and the other is an associate of the
third party
The entity is a post-employment benefit plan for employees of reporting entity
or entity related to the reporting entity. If the reporting entity is itself a plan the
sponsoring employers are also related to the entity
Entity is controlled or jointly controlled by person with control or joint control
in the reporting entity e.g. Mr A has 60% in ABC ltd and 60% in EFG ltd ABC
ltd and EFG ltd are related
Close member of the family of a person
- That person’s children and spouse or domestic partner
- Children of that person’s spouse or domestic partner
- Dependents of that person or that person’s spouse or domestic partner
Government-related entity = entity that is controlled, jointly controlled or significantly
influenced by a government
The following are not related parties
Two entities simply because they have a director or member of key management in
common, or because a member of key management of one entity has significant
influence over the other
Disclosure – related parties
Disclosure must include:
, The nature of the relationship between the related parties
Amount of the transactions
The amount of any outstanding balances(payable and receivable must be
distinguished)
The terms and conditions, any security and method of settlement
Details of guarantees given or received
Provisions for doubtful debt relating to outstanding balances
The expenses recognised in respect of doubtful debt due during the period
Disclosure of related party transaction is made for:
Parent
Entities that are jointly controlled or exercise significant influence
Subsidiaries
Associate
Joint ventures
Key management personnel of the entity or its parent
Possible examples of related party transactions:
Purchase or sale of property
Leases
Rendering or receiving services
Government-related entities are exempt from disclosure requirements
If this exemption is applied must disclose the following:
Name of the government as well as the nature of the relationship
The nature and amount of each individual significant transaction
For transactions that are collectively significant but not individually significant, a
quantitative and qualitative indication of their extent
Financial instruments
Financial liability
Contractual obligation to deliver cash or other financial asset
Can be settled in the entity’s own equity instruments:
Non derivative obliged to deliver a variable number of its own shares
Derivative obliged to deliver a fixed number of its own shares
, NOT FINANCIAL ASSET NOT FINANCIAL LIABILITY
Inventories, PPE, right of use asset, intangible asset
Assets leased out by operating lease
Prepaid expenses = future economic benefit is to receive goods or services, not right
to receive cash or other financial asset.
Deferred revenue and most warranties
Income taxes created as a result of statutory requirements imposed by government =
taxes are not contractual
AMORTISED COST
We use amortised cost if business model is :
To hold asset in order to collect contractual cash flows
And cash flows are solely payments of principal and interest on the principal
amount outstanding.
Interest goes to profit and loss
Transaction costs are capitalised
FAIR VALUE THROUGH PROFIT AND LOSS
Transaction costs go straight to profit and loss
We use this if amortised cost is not used
FAIR VALUE THROUGH OCI
At initial recognition entity can choose this, but it is irreversible.
Transaction costs are capitalised
Financial liability = amortised cost = capitalise transaction costs
Timing of recognition
When entity becomes party to a contract and as a result has right to receive or
obligation to pay cash.
Impairment and un-collectability of financial assets
Expected credit loss model applies to:
Financial assets at amortised cost
Financial assets (other than shares) at fair value through OCI
NOTES
,Related parties
Reporting entity must disclose transactions with related parties
A person or a close member of that person’s family is related to the reporting entity if
that person:
Has control or joint control over reporting entity
Has significant influence over the reporting entity =<20%
Is a member of key management personnel of the reporting entity or a parent
of the reporting entity
An entity is related to a reporting entity if any of the following conditions apply:
The entity and reporting entity are members of the same group e.g. fellow
subsidiaries
One entity is an associate or joint venture of the other entity
Both entities are joint ventures of the same third party
One entity is a joint venture of a third party and the other is an associate of the
third party
The entity is a post-employment benefit plan for employees of reporting entity
or entity related to the reporting entity. If the reporting entity is itself a plan the
sponsoring employers are also related to the entity
Entity is controlled or jointly controlled by person with control or joint control
in the reporting entity e.g. Mr A has 60% in ABC ltd and 60% in EFG ltd ABC
ltd and EFG ltd are related
Close member of the family of a person
- That person’s children and spouse or domestic partner
- Children of that person’s spouse or domestic partner
- Dependents of that person or that person’s spouse or domestic partner
Government-related entity = entity that is controlled, jointly controlled or significantly
influenced by a government
The following are not related parties
Two entities simply because they have a director or member of key management in
common, or because a member of key management of one entity has significant
influence over the other
Disclosure – related parties
Disclosure must include:
, The nature of the relationship between the related parties
Amount of the transactions
The amount of any outstanding balances(payable and receivable must be
distinguished)
The terms and conditions, any security and method of settlement
Details of guarantees given or received
Provisions for doubtful debt relating to outstanding balances
The expenses recognised in respect of doubtful debt due during the period
Disclosure of related party transaction is made for:
Parent
Entities that are jointly controlled or exercise significant influence
Subsidiaries
Associate
Joint ventures
Key management personnel of the entity or its parent
Possible examples of related party transactions:
Purchase or sale of property
Leases
Rendering or receiving services
Government-related entities are exempt from disclosure requirements
If this exemption is applied must disclose the following:
Name of the government as well as the nature of the relationship
The nature and amount of each individual significant transaction
For transactions that are collectively significant but not individually significant, a
quantitative and qualitative indication of their extent
Financial instruments
Financial liability
Contractual obligation to deliver cash or other financial asset
Can be settled in the entity’s own equity instruments:
Non derivative obliged to deliver a variable number of its own shares
Derivative obliged to deliver a fixed number of its own shares
, NOT FINANCIAL ASSET NOT FINANCIAL LIABILITY
Inventories, PPE, right of use asset, intangible asset
Assets leased out by operating lease
Prepaid expenses = future economic benefit is to receive goods or services, not right
to receive cash or other financial asset.
Deferred revenue and most warranties
Income taxes created as a result of statutory requirements imposed by government =
taxes are not contractual
AMORTISED COST
We use amortised cost if business model is :
To hold asset in order to collect contractual cash flows
And cash flows are solely payments of principal and interest on the principal
amount outstanding.
Interest goes to profit and loss
Transaction costs are capitalised
FAIR VALUE THROUGH PROFIT AND LOSS
Transaction costs go straight to profit and loss
We use this if amortised cost is not used
FAIR VALUE THROUGH OCI
At initial recognition entity can choose this, but it is irreversible.
Transaction costs are capitalised
Financial liability = amortised cost = capitalise transaction costs
Timing of recognition
When entity becomes party to a contract and as a result has right to receive or
obligation to pay cash.
Impairment and un-collectability of financial assets
Expected credit loss model applies to:
Financial assets at amortised cost
Financial assets (other than shares) at fair value through OCI
