IAS 24 Related Party Disclosures: Who Counts and What Must Be Disclosed

Related party transactions can quietly shift value within a group or between a company and its insiders, so IAS 24 forces them into the open. By requiring disclosure of who the related parties are, what transactions occurred, and what balances remain outstanding, the standard lets users judge whether reported results were affected by dealings that were not at arm’s length. This guide explains who counts as a related party, what must be disclosed, and why it matters.

Who is a related party under IAS 24?

IAS 24 defines related parties broadly. A person or entity is related to the reporting entity if they have control, joint control, or significant influence over it, or are a member of its key management personnel — or close family of such a person. Entities are related where one controls or significantly influences the other, where they are members of the same group, where one is an associate or joint venture of the other, and in various other configurations including post-employment benefit plans for the entity’s employees.

The breadth is deliberate. The standard aims to capture every relationship through which the terms of transactions might be influenced by something other than independent commercial bargaining. This includes not just the obvious parent-subsidiary links but also key management and their families, and entities those individuals control. Identifying the full population of related parties is the essential first step, and it requires looking beyond legal ownership to influence and personal connections.

What must be disclosed about related party transactions?

Where related party transactions have occurred, IAS 24 requires disclosure of the nature of the relationship and information about the transactions and outstanding balances necessary for users to understand their potential effect. This includes the amount of the transactions, the amount and terms of outstanding balances including commitments, provisions for doubtful debts related to them, and any expense recognised for bad or doubtful debts due from related parties.

Disclosures are generally made separately for each category of related party — the parent, entities with joint control or significant influence, subsidiaries, associates, joint ventures, key management personnel, and other related parties. This categorised disclosure lets users see the pattern and scale of related party dealings. The disclosures are required even where transactions were conducted on normal commercial terms, because the relationship itself is the relevant fact.

Why must key management compensation be disclosed?

IAS 24 specifically requires disclosure of key management personnel compensation in total and analysed by category: short-term employee benefits, post-employment benefits, other long-term benefits, termination benefits, and share-based payment. Key management personnel are those with authority and responsibility for planning, directing, and controlling the entity, directly or indirectly, including directors.

This requirement reflects the principle that the people running the entity are inherently related parties whose remuneration is a relevant fact for users. The disclosure provides transparency over what the stewards of the business are paid, which is information investors and other stakeholders consider important for governance and for understanding a significant category of expense. It is one of the most consistently scrutinised related party disclosures.

How do related party disclosures work within a group?

Within a group, transactions between the parent and subsidiaries, and among subsidiaries, are related party transactions. However, intragroup transactions and balances are eliminated on consolidation, so they do not appear in the consolidated financial statements and do not require related party disclosure there. They remain disclosable in the separate financial statements of the individual entities, where they are not eliminated.

IAS 24 provides a partial exemption from disclosure for transactions with government-related entities, recognising the impracticality of disclosing every transaction where a government controls or significantly influences many entities. For ordinary corporate groups, the key point is that related party disclosure in the separate statements can be extensive, while the consolidated statements focus on transactions with parties outside the consolidated group — such as associates, joint ventures, and key management. This connects to the consolidation mechanics explored across our IFRS hub.

Why are related party disclosures so important for trust?

Related party disclosures sit at the heart of financial statement integrity because related party transactions are a classic vehicle for shifting value, obscuring performance, or extracting benefits from a company in ways that are not at arm’s length. A sale to a related party at an inflated price can flatter revenue; a loan to a connected entity on soft terms can disguise a distribution; a purchase from an insider can extract value. Disclosure does not prevent these but makes them visible.

For investors, lenders, and regulators, the related party note is therefore a key place to assess governance and the reliability of reported results. Heavy or unusual related party activity is a flag warranting closer scrutiny, while clean, well-explained disclosures support confidence in the accounts. For groups with complex ownership and cross-border structures, robust related party disclosure is part of demonstrating that the numbers can be trusted, reinforcing the transparency theme that runs through our IFRS hub.

How do related party disclosures interact with transfer pricing?

Related party transactions and transfer pricing are closely connected, because cross-border transactions between group entities must be priced and the prices have both tax and disclosure consequences. While IAS 24 governs the financial reporting disclosure of related party transactions, tax authorities separately require that intragroup transactions be conducted at arm’s length under transfer pricing rules. The two regimes look at the same transactions from different angles — disclosure versus pricing — but they reinforce the importance of documenting related party dealings thoroughly.

For a multinational group with intercompany sales, services, financing, and licensing across jurisdictions, maintaining robust documentation of related party transactions serves both purposes: it supports the IAS 24 disclosures in the separate and consolidated accounts and underpins the transfer pricing documentation tax authorities demand. Treating related party transaction tracking as a single discipline serving both reporting and tax is efficient and reduces the risk of inconsistency between the two, a cross-functional theme that recurs across our IFRS hub.

What are the practical challenges in related party disclosure?

The main practical challenge in related party disclosure is completeness — identifying the full population of related parties, which extends beyond the corporate group to key management personnel, their close family members, and entities those individuals control or significantly influence. Personal relationships and indirect ownership chains are easy to miss, and the population changes as directors join and leave, as family circumstances change, and as the group’s investments evolve. A relationship missed is a disclosure omitted.

A second challenge is capturing all the transactions and balances with each related party across the group’s systems, especially where related party dealings are routine and embedded in ordinary trading. The practical solution is a maintained related party register, reviewed each period, combined with a process that flags transactions with listed related parties as they occur. This turns related party disclosure from a year-end detective exercise into a controlled, ongoing process, consistent with the controls discipline emphasised across our IFRS hub.

How do related party disclosures fit into governance?

Related party disclosures are as much a governance matter as an accounting one. Boards and audit committees pay close attention to related party transactions because they are a recognised channel through which conflicts of interest can manifest — a director’s connected company winning contracts, a controlling shareholder’s entity receiving favourable terms, or management benefiting from arrangements not available to others. Strong governance requires that such transactions are identified, scrutinised, approved through appropriate processes, and disclosed.

The IAS 24 disclosures are the external expression of this governance discipline, letting shareholders and other stakeholders see the related party activity that the board has overseen. For companies with concentrated ownership or significant insider involvement, the quality and candour of related party disclosure signals the strength of governance. Treating related party identification, approval, and disclosure as an integrated governance process — not just a year-end accounting task — protects the company and its stakeholders, reinforcing the integrity themes across our IFRS hub.

How do related party disclosures differ in separate and consolidated accounts?

The related party disclosures required differ between an entity’s separate financial statements and the consolidated financial statements of its group. In the separate statements of an individual entity, transactions and balances with other group members — the parent, fellow subsidiaries, and subsidiaries — are related party transactions requiring disclosure, because they are not eliminated. In the consolidated statements, these intragroup transactions are eliminated and so do not feature; the consolidated related party disclosures focus on transactions with parties outside the consolidated group.

This distinction matters for groups that prepare both separate and consolidated statements. The separate statements of each entity can carry extensive related party disclosure of intragroup dealings, while the consolidated statements concentrate on associates, joint ventures, key management personnel, and other external related parties. Understanding which disclosures belong where prevents both omission and unnecessary duplication, and it connects directly to the consolidation mechanics explored across our IFRS hub.

Why do regulators and auditors focus so heavily on related parties?

Related party transactions attract intense scrutiny from auditors and regulators because they have featured in many of the most serious accounting failures and frauds. Value can be siphoned out of a company, losses hidden in connected entities, or performance flattered through transactions that would never occur between independent parties. Because related parties can transact on terms unavailable in the open market, these dealings are an inherent risk to the reliability of the financial statements.

Auditors are required to design procedures specifically to identify and assess related party relationships and transactions, including those not previously disclosed, and to evaluate whether they have been properly accounted for and disclosed. For preparers, this means related party disclosure is an area of heightened audit effort and one where completeness and candour are essential. Robust identification and disclosure is both a compliance requirement and a signal of integrity, reinforcing the trust themes that run through our IFRS hub.

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