GOOD MORNING

ACCOUNTING STANDARD 18 RELATED PARTY DISCLOSURES

PRESENTED BY RASMITA MISHRA NUPUR SAMANTARAY

RELATED PARTY

A related party is essentially any party that controls or can significantly influence the management or operating policies of the company during the reporting period

AS-18, deals only with the following related party relationship

Enterprises that directly, or indirectly through one or more intermediaries, control or controlled by, or are under common control

with the reporting enterprise Associates and joint ventures of the reporting enterprise and the investing party or venture in respect of which the reporting enterprise is an associate or a joint venture

Contd..
Individuals owing an interest in the voting power of the reporting enterprise that gives them control or significant influence over

the enterprise and relatives of any such individual. Directors or major shareholders of the reporting enterprise

EXAMPLE
IDENTIFY THE RELATED PARTIES X limited holds 51% of Y limited Y limited holds 51% of z limited O limited holds 49% of z limited

WHAT SHOULD BE DISCLOSED

Related party relationship Transactions between a

reporting enterprise and its related parties

Classifications of Related Parties

On the basis of control concept

i) control by ownership ii) control over composition of board iii) control of substantial interest in the voting power

Contd..
On the basis of significant influence i) by representation of the board of

directors ii) participation in policy making process iii) material inter- company transactions iv) inter-change of managerial personnel v) dependence on technical information

Exception of related party

Two companies simply because they have a director in common,

A single customer, supplier, franchiser, distributor, or general agent with whom an enterprise transacts a significant volume of business Providers of finance;
Trade unions; Public utilities;

Government departments and government agencies including Government sponsored bodies.

 such disclosures would conflict with the

reporting enterprises duties of confidentiality as specifically required in terms of a statute or by any regulator In case a statute or a regulator or a similar competent authority governing an enterprise prohibit the enterprise to disclose certain information No disclosure is required in consolidated financial statements in respect of intra-group transactions.

 Disclosure of transactions between members

of a group is unnecessary in consolidated financial statements

No disclosure is required in the financial

statements of state controlled enterprises as regards related party relationships with other state-controlled enterprises and transactions with such enterprises.

Purpose of disclosure
A related party relationship could have an effect on

the profit or loss and financial position of an entity.

The profit or loss and financial position of an entity

may be affected by a related party relationship even if related party transactions do not occur.
Related party relationships are a normal feature of commerce and business.

AS 18 VS IFRS/IAS 24
Basis of distinction are:
Meaning State controlled ethics Pricing policies

CASE STUDY

SATYAM SAGA

Details
Proposal to acquire Maytas Infra and Maytas Properties at $1.6 bn

Share holding pattern

Satyam

Promoters -8.74% Public -71.80% FII - 48.2% Others -19.46%

Maytas

Promoters 36.64% Public - 63.36% FII - 4.88%

Why shareholder protest??

Investment amount Raju sons as Promoters of Maytas Deal not approved by shareholders Over valuation of Maytas 4 independent directors resigned Disclosure of facts by Raju

Facts disclosed
Inflated cash and bank balance Understated liabilities Overstated debtor position Overstated profit position

Reason for the Deal

Fill the gap of fictitious assets with

real one Benefits at the end of Maytas Infra and Properties

To be trusted is a greater compliment

than being loved

&

Trust is like a vase ,once it breaks though you can fix it but the vase will never be same again

THANK YOU & HAVE A NICE DAY