IAS 24 is the International Accounting Standard that governs related party disclosures. In simple terms, it tells a company what it must reveal when it does business with people or entities that are close enough to influence its decisions, pricing, or reported results. For accountants, investors, auditors, and students, IAS 24 is essential because hidden related-party dealings can materially change how financial statements are interpreted.

1. Term Overview

• Official Term: IAS 24
• Common Synonyms: IAS 24 Related Party Disclosures, Related Party Disclosures standard, related party disclosure standard under IFRS
• Alternate Spellings / Variants: IAS-24, IAS 24, Related Party Disclosures
• Domain / Subdomain: Finance / Accounting Standards and Frameworks
• One-line definition: IAS 24 is the accounting standard that requires disclosure of related party relationships, transactions, balances, commitments, and key management personnel compensation.
• Plain-English definition: If a company deals with its parent company, subsidiaries, directors, senior executives, owners, their close family members, or businesses connected to them, IAS 24 tells the company what it must disclose in the financial statement notes.
• Why this term matters:
• Related parties may not transact on fully independent terms.
• Profits, expenses, loans, guarantees, and balances can be shifted or structured through connected parties.
• Investors and lenders need transparency to judge earnings quality, governance quality, and risk.
• Auditors and regulators look closely at related-party disclosures because they are a common area of misstatement and abuse.

2. Core Meaning

What it is

IAS 24 is a disclosure standard within the IAS/IFRS framework. It does not mainly tell you how to measure a transaction; it tells you what to disclose when the counterparty is related to the reporting entity.

Why it exists

Financial statements can be affected not only by normal market transactions, but also by transactions with parties that have:

• control,
• joint control,
• significant influence,
• management authority,
• family or ownership connections.

When these connections exist, prices and terms may differ from what unrelated parties would agree to.

What problem it solves

IAS 24 tries to solve a transparency problem:

• A company could overstate revenue by selling to a connected entity.
• It could hide financing support through related-party loans or guarantees.
• It could shift expenses or assets between group entities.
• It could compensate management indirectly through related businesses rather than direct salary.

IAS 24 helps users of financial statements identify those risks.

Who uses it

• Accountants and financial reporting teams
• Auditors
• CFOs and controllers
• Audit committees and boards
• Investors and equity analysts
• Lenders and credit analysts
• Regulators and enforcement teams
• Students preparing for IFRS, audit, or corporate reporting exams

Where it appears in practice

You will typically see IAS 24 applied in:

• annual report notes titled Related Party Disclosures,
• standalone financial statements,
• IFRS-compliant consolidated financial statements,
• audit working papers,
• due diligence questionnaires,
• governance and approval processes for connected transactions.

3. Detailed Definition

Formal definition

IAS 24 is the IFRS-era accounting standard that requires an entity to disclose information needed to highlight the possibility that its financial position and profit or loss may have been affected by:

• the existence of related parties, and
• transactions and outstanding balances with those related parties.

Technical definition

Technically, IAS 24 does three big things:

1. Defines who counts as a related party
2. Defines what counts as a related party transaction
3. Specifies what disclosures are required

A related party transaction is broader than a sale or purchase. It includes a transfer of resources, services, or obligations, whether or not a price is charged.

Operational definition

In day-to-day reporting, IAS 24 works like this:

1. Identify all persons and entities connected by control, influence, management, or close family ties.
2. Determine whether transactions, balances, commitments, guarantees, or compensation exist with them.
3. Group them into disclosure categories.
4. Disclose the required information in the notes.

Context-specific definitions

Under IFRS / IAS framework

IAS 24 refers to the international standard Related Party Disclosures.

In India

The local converged equivalent is generally Ind AS 24, which follows the same core idea of related party disclosures. However, companies should verify the latest Indian text and compare it separately with company law and listing-rule requirements, because accounting definitions and legal approval rules are not always identical.

In the United States

IAS 24 itself is not the governing standard under U.S. GAAP. Comparable topics are addressed under ASC 850 and other relevant guidance. The concept is similar, but definitions, terminology, and disclosure details may differ.

4. Etymology / Origin / Historical Background

Origin of the term

• IAS stands for International Accounting Standard.
• 24 is the number assigned to this standard within the IAS series.
• The full standard name is Related Party Disclosures.

Historical development

The standard originated in the older international accounting standards system and was later carried into the modern IASB/IFRS framework. Related-party reporting became important as business groups became more complex, corporate governance expectations rose, and regulators focused more heavily on transparency.

How usage has changed over time

Early use was largely about obvious connections such as parent-subsidiary relationships and director-linked transactions. Over time, reporting practice expanded to cover:

• more sophisticated group structures,
• key management personnel compensation,
• government-related entities,
• indirect and family-linked influence,
• stronger investor and audit expectations.

Important milestones

A few practical milestones matter:

• The standard originated in the legacy international standards era.
• It was later maintained and updated within the IASB system.
• A major revision in the late 2000s simplified some government-related entity disclosures and clarified parts of the related-party definition.
• Today, IAS 24 is a core standard in IFRS financial reporting and an important audit focus area.

Caution: If you need exact issue dates, amendment dates, or current effective-date history for legal or exam purposes, verify the latest official IFRS publication.

5. Conceptual Breakdown

5.1 Related party relationship tests

Meaning

The first question is whether a person or entity is related to the reporting entity.

Role

This is the gatekeeper test. If there is no related party relationship, IAS 24 disclosure usually stops there.

Key relationship drivers

A party may be related because of:

• control
• joint control
• significant influence
• key management role
• close family connection
• group membership

Interaction with other components

These tests connect directly with IFRS concepts such as:

• control over subsidiaries,
• significant influence over associates,
• joint control over joint ventures.

Practical importance

Most IAS 24 errors happen here. If a company fails to identify the party correctly, the rest of the disclosure can be incomplete.

5.2 Persons versus entities

Meaning

IAS 24 applies both to:

• persons such as owners, directors, and senior executives, and
• entities such as subsidiaries, associates, joint ventures, fellow subsidiaries, and family-controlled companies.

Role

This matters because relatedness can arise through people as well as through company structures.

Practical importance

A transaction with a director’s spouse-owned company may require disclosure even if the company itself is not in the same corporate group.

5.3 Related party transactions

Meaning

A related party transaction is a transfer of:

• resources,
• services, or
• obligations

between related parties, whether or not money is charged.

Examples

• Sales and purchases
• Loans and advances
• Guarantees
• Lease payments
• Management fees
• Asset transfers
• Shared services
• Free or below-market support arrangements

Practical importance

Companies sometimes miss non-cash or zero-price arrangements. IAS 24 still cares about them.

5.4 Outstanding balances and commitments

Meaning

IAS 24 is not limited to income statement activity. It also covers what remains unpaid or committed at period end.

Role

Users need to know not only what happened during the year, but what exposures still exist.

Typical items

• receivables,
• payables,
• loans,
• guarantees,
• future commitments,
• provisions and impairment related to related-party balances.

Practical importance

A small transaction can create a large year-end exposure.

5.5 Key management personnel compensation

Meaning

IAS 24 requires disclosure of compensation for key management personnel, typically in categories.

Usual categories

• short-term employee benefits,
• post-employment benefits,
• other long-term benefits,
• termination benefits,
• share-based payment.

Role

This improves transparency around how top management is rewarded.

Practical importance

Many readers care less about ordinary related-party trade balances and more about how management is compensated and incentivized.

5.6 Parent and ultimate controlling party disclosures

Meaning

The standard requires disclosure of parent relationships, and usually the ultimate controlling party if different.

Role

This helps users understand who ultimately controls the entity.

Practical importance

A company’s apparent independence can look very different once its control chain is known.

5.7 Exemptions and exclusions

Meaning

Not every connected-looking party is a related party, and not every relationship gets the same depth of disclosure.

Important exclusions often misunderstood

The following are not automatically related parties merely because of one fact alone:

• two companies sharing one director,
• two venturers that share control of one joint venture,
• a major customer,
• a major supplier,
• a bank,
• a utility provider,
• a government department in normal dealings,

unless other related-party criteria are met.

Government-related relief

Government-related entities may receive reduced disclosure in certain cases, but not a complete exemption from meaningful transparency.

6. Related Terms and Distinctions

Related Term	Relationship to Main Term	Key Difference	Common Confusion
Related party	Core concept inside IAS 24	A related party is the person or entity; IAS 24 is the standard governing disclosure	People often use the term and the standard name interchangeably
Related party transaction	Main disclosure subject under IAS 24	Transaction is the event; IAS 24 is the rulebook	Some think only paid transactions count
Control	One basis for relatedness	Control is stronger than influence and often creates parent-subsidiary relationships	Confused with significant influence
Joint control	Another basis for relatedness	Requires shared control by agreement, not merely collaboration	Often confused with minority investment
Significant influence	Another basis for relatedness	Less than control; often linked to associates	Many assume influence equals control
Key management personnel (KMP)	Important class of related persons	KMP are individuals with authority over planning, directing, and controlling the entity	Often limited wrongly to board directors only
Close family members	Can create related-party links	Family connection matters if influence can be expected	Many assume every relative automatically qualifies
IFRS 10	Supporting standard	IFRS 10 helps determine control; IAS 24 uses that control outcome for disclosure	Some think IFRS 10 replaces IAS 24
IAS 28	Supporting standard	IAS 28 helps identify associates and some joint venture relationships; IAS 24 uses these relationships for disclosure	Confused because both mention significant influence
IFRS 12	Related disclosure standard	IFRS 12 focuses on interests in other entities; IAS 24 focuses on transactions and relationships with related parties	Often confused in group reporting
IAS 27	Related reporting framework term	IAS 27 deals with separate financial statements; IAS 24 disclosures may differ in impact between separate and consolidated statements	Many forget intragroup items may still matter in separate financial statements
Ind AS 24	Local equivalent in India	Indian converged version of the related-party disclosure standard	Assumed to be identical in all legal consequences to Companies Act or listing rules
ASC 850	U.S. GAAP equivalent area	U.S. GAAP uses a different codification framework	People assume IAS 24 and ASC 850 are identical
Arm’s length transaction	Possible pricing claim	IAS 24 is about disclosure; arm’s length is about whether pricing resembles market terms	Some think calling a deal arm’s length removes disclosure need
Transfer pricing	Tax concept often overlaps	Transfer pricing deals with tax and pricing rules; IAS 24 deals with financial statement disclosure	Frequently treated as the same thing

7. Where It Is Used

Accounting and financial reporting

This is the primary home of IAS 24. It appears in note disclosures in annual and interim financial statements prepared under IFRS-style frameworks.

Auditing

Auditors pay close attention to related parties because the area has elevated fraud and misstatement risk. They test:

• completeness of the related party list,
• unusual transactions,
• year-end balances,
• approval processes,
• disclosure accuracy.

Business operations and governance

IAS 24 affects:

• procurement arrangements,
• treasury loans within groups,
• service agreements,
• director-linked leases,
• board approval workflows.

Stock market and listed-company analysis

For listed companies, related-party disclosures are highly relevant to:

• promoter influence,
• earnings quality,
• minority shareholder protection,
• corporate governance assessment.

Banking and lending

Lenders review related-party exposures to understand:

• concentration risk,
• connected lending,
• group support assumptions,
• hidden liabilities or guarantees.

Valuation and investing

Analysts use IAS 24 notes to assess whether profits are sustainable or artificially supported by related entities.

Policy and regulation

Securities regulators, company-law authorities, and market watchdogs often scrutinize related-party arrangements. Accounting disclosure under IAS 24 may operate alongside separate approval or governance requirements.

Analytics and research

Researchers and forensic analysts use related-party data to study:

• governance quality,
• tunneling risk,
• earnings management,
• ownership structure effects.

Contexts where it is not the main term

IAS 24 is not a stock chart pattern, macroeconomic indicator, or valuation formula. It is fundamentally an accounting disclosure standard.

8. Use Cases

8.1 Intragroup sales disclosure in separate financial statements

• Who is using it: Corporate accountant
• Objective: Disclose sales and balances with subsidiaries or fellow group entities
• How the term is applied: The accountant identifies related entities within the group and reports transaction amounts, balances, and terms where required
• Expected outcome: Transparent standalone financial statements
• Risks / limitations: Teams may wrongly assume intragroup transactions never need disclosure because they are eliminated in consolidation

8.2 Director-linked lease arrangement

• Who is using it: Finance controller and audit committee
• Objective: Determine whether a lease with a director-owned property company requires disclosure
• How the term is applied: The controller tests whether the property company is related through control by a director or close family member
• Expected outcome: Proper disclosure of rent expense, liabilities, and any outstanding balance
• Risks / limitations: Beneficial ownership may be hidden behind layered legal entities

8.3 Key management compensation note

• Who is using it: Listed company reporting team
• Objective: Present KMP compensation transparently
• How the term is applied: Compensation is grouped into IAS 24 categories such as short-term benefits and share-based payments
• Expected outcome: Better governance transparency
• Risks / limitations: Companies may undercapture indirect or parent-level management compensation

8.4 Government-related entity reporting

• Who is using it: Public sector or government-controlled enterprise
• Objective: Comply efficiently where many transactions involve government-related entities
• How the term is applied: The entity uses the reduced-disclosure approach where available but still explains the government relationship and significant transactions
• Expected outcome: Compliance without excessive note clutter
• Risks / limitations: Overreliance on the exemption can reduce clarity if disclosures become too generic

8.5 Audit review of loans and guarantees

• Who is using it: External auditor
• Objective: Test whether related-party loans, guarantees, and commitments are fully disclosed
• How the term is applied: The auditor traces board minutes, confirmations, and legal agreements to identify undisclosed relationships
• Expected outcome: Lower risk of omission or fraud
• Risks / limitations: Side letters and informal arrangements may be hard to detect

8.6 Investor due diligence before buying shares

• Who is using it: Equity analyst or investor
• Objective: Assess whether company profits depend heavily on promoter-linked or affiliate transactions
• How the term is applied: The investor reads the IAS 24 note to identify revenue concentration, unusual balances, and non-market terms
• Expected outcome: Better valuation judgment and risk assessment
• Risks / limitations: Disclosure quality varies, and legal compliance does not automatically mean the economics are attractive

9. Real-World Scenarios

A. Beginner scenario

Background

A small family-owned company rents a warehouse from the founder’s spouse.

Problem

The owner thinks the warehouse lease is private and does not belong in the company’s financial statements.

Application of the term

Under IAS 24, the spouse may be a close family member of a person who controls the company. A transaction with the spouse-owned property business may therefore be a related-party transaction.

Decision taken

The company discloses:

• the relationship,
• annual rent paid,
• any unpaid rent at year-end,
• important terms if relevant.

Result

The financial statements become more transparent, and the auditor is satisfied that the lease was not hidden.

Lesson learned

Even ordinary transactions like rent can become reportable if the counterparty is connected to control or management.

B. Business scenario

Background

A manufacturing group has a parent company, two subsidiaries, and a fellow subsidiary that supplies components.

Problem

The local finance team assumes all group transactions are ignored under IAS 24 because they disappear in consolidated accounts.

Application of the term

The team learns that intragroup balances may indeed be eliminated in consolidated financial statements, but disclosures may still matter in separate financial statements and internal reporting.

Decision taken

The finance team prepares one related-party matrix for the whole group and then tailors disclosures separately for consolidated and standalone reporting packs.

Result

Reporting becomes consistent across entities, and year-end close is smoother.

Lesson learned

“Group transaction” does not automatically mean “no disclosure in every reporting context.”

C. Investor / market scenario

Background

An investor is analyzing a listed company with strong revenue growth.

Problem

The investor notices that a large share of sales is made to an entity controlled by the promoter group.

Application of the term

The IAS 24 note reveals:

• significant sales to the promoter-linked distributor,
• long payment terms,
• a rising receivable balance,
• a guarantee provided by the company.

Decision taken

The investor adjusts the valuation view, asks whether the revenue is truly market-based, and places more weight on cash conversion than on reported sales.

Result

The investor avoids relying only on headline revenue growth.

Lesson learned

Related-party notes often reveal the quality behind the numbers.

D. Policy / government / regulatory scenario

Background

A state-controlled utility frequently buys electricity, financing support, and services from other government-controlled bodies.

Problem

A literal full listing of every transaction would produce enormous note clutter.

Application of the term

The utility uses the government-related entity relief available in IAS 24, while still disclosing:

• the nature of the government relationship,
• the fact that significant transactions exist,
• enough qualitative and quantitative detail for users to understand them.

Decision taken

The company presents focused disclosures on major categories rather than overwhelming line-by-line detail.

Result

Users get meaningful transparency without unreadable notes.

Lesson learned

IAS 24 tries to balance relevance and reporting burden.

E. Advanced professional scenario

Background

A multinational group has: – a parent company, – an associate, – a joint venture, – executives seconded from the parent, – a supplier controlled by the CFO’s spouse.

Problem

The year-end close team is unsure how to classify transactions, balances, commitments, and compensation across categories.

Application of the term

The technical accounting team builds an IAS 24 mapping file that identifies:

• parties by legal entity and beneficial owner,
• relationship type,
• transaction type,
• outstanding balance,
• guarantee or commitment status,
• disclosure category.

Decision taken

The group expands the related-party note and includes KMP compensation, guarantees, allowance information, and category-wise balances.

Result

The audit is completed with fewer late-stage adjustments and fewer regulator-style questions.

Lesson learned

For complex groups, related-party compliance is a data governance exercise, not just a note-drafting exercise.

10. Worked Examples

10.1 Simple conceptual example

A company’s CEO uses a logistics company owned by the CEO’s spouse to deliver finished goods.

• The CEO is key management personnel.
• The spouse is a close family member.
• The spouse-owned logistics company may therefore be a related party.

What must be considered for disclosure: – freight charges during the year, – unpaid amount at year-end, – whether terms are unusual, – whether there are guarantees or commitments.

10.2 Practical business example

Facts

Beta Manufacturing Ltd has the following with a related associate:

• Purchases of raw materials during the year: CU 1,200,000
• Amount payable at year-end: CU 250,000
• The payable is unsecured and interest-free
• Beta also provided a guarantee of CU 100,000 to support the associate’s bank facility

How IAS 24 is applied

Beta should consider disclosing:

• the related party relationship: associate,
• the amount of purchases,
• the year-end payable,
• the fact that the payable is unsecured and interest-free,
• the guarantee provided,
• any commitments or impairment implications if relevant.

Expected disclosure outcome

Users can see not just that Beta bought from a related party, but also that Beta is financially supporting that party.

10.3 Numerical example

Facts

Gamma Ltd must prepare its IAS 24 note. During the year it had:

• Sales to parent: CU 2,500,000
• Purchases from associate: CU 900,000
• Lease expense paid to a director-controlled entity: CU 300,000
• Receivable from parent at year-end: CU 400,000
• Payable to associate at year-end: CU 150,000
• Allowance for doubtful receivable from parent: CU 10,000

KMP compensation: – Short-term employee benefits: CU 1,000,000 – Post-employment benefits: CU 120,000 – Other long-term benefits: CU 30,000 – Termination benefits: CU 50,000 – Share-based payment: CU 200,000

Step 1: Identify the categories

• Parent
• Associate
• Director-controlled entity
• Key management personnel compensation

Step 2: Compute total KMP compensation

Total KMP compensation
= 1,000,000 + 120,000 + 30,000 + 50,000 + 200,000
= CU 1,400,000

Step 3: Organize the note content

Transactions – Sales to parent: CU 2,500,000 – Purchases from associate: CU 900,000 – Lease expense to director-controlled entity: CU 300,000

Outstanding balances – Receivable from parent: CU 400,000 – Less allowance: CU 10,000 – Net exposure: CU 390,000 – Payable to associate: CU 150,000

KMP compensation – Total: CU 1,400,000, broken into required categories

Step 4: Why this matters

A reader can now evaluate: – dependence on the parent for revenue, – support or risk connected to the associate, – the scale of related-party leasing, – management compensation structure.

10.4 Advanced example

Facts

Delta Infrastructure is government-controlled. It also has: – transactions with other government-controlled entities, – a joint venture, – loans to an entity controlled by the CEO’s spouse, – parent-level executives who help direct the company.

Analysis

Delta must separately assess: – whether government-related relief applies for some transactions, – whether the spouse-controlled entity is a related party, – whether parent-company executives count as KMP of the parent for disclosure purposes if relevant, – whether loans, balances, guarantees, and commitments all need separate attention.

Result

Delta prepares: – targeted government-related disclosures, – specific disclosures for the spouse-controlled borrower, – KMP compensation categories, – outstanding loan balances and guarantee details.

Key lesson: Advanced IAS 24 work is about classification discipline and complete fact gathering.

11. Formula / Model / Methodology

IAS 24 does not have a central valuation formula like EPS, ROE, or WACC. It is mainly a disclosure methodology. However, two structured calculation frameworks are useful.

11.1 Formula: Total Key Management Personnel Compensation

Formula

Total KMP Compensation = STB + PEB + OLTB + TB + SBP

Meaning of each variable

• STB = Short-term employee benefits
• PEB = Post-employment benefits
• OLTB = Other long-term benefits
• TB = Termination benefits
• SBP = Share-based payment

Interpretation

This gives the total compensation paid or recognized for key management personnel, but IAS 24 usually expects the category breakdown as well, not only the total.

Sample calculation

If: – STB = CU 800,000 – PEB = CU 100,000 – OLTB = CU 20,000 – TB = CU 0 – SBP = CU 180,000

Then:

Total KMP Compensation
= 800,000 + 100,000 + 20,000 + 0 + 180,000
= CU 1,100,000

Common mistakes

• Counting only salaries and ignoring share-based payment
• Excluding termination benefits
• Missing compensation of relevant management linked through the parent where applicable
• Reporting only the total without the category split

Limitations

This formula adds compensation categories, but it does not solve the harder problem: deciding who qualifies as KMP.

11.2 Method: IAS 24 Disclosure Package

A useful disclosure checklist can be written as:

Required IAS 24 Note = Relationship + Transaction Amounts + Outstanding Balances + Terms/Conditions + Guarantees/Commitments + Allowance/Bad Debt Information + KMP Compensation

What each element means

• Relationship: Why the counterparty is related
• Transaction Amounts: What happened during the period
• Outstanding Balances: What remains due
• Terms/Conditions: Secured or unsecured, interest-bearing or not, settlement terms
• Guarantees/Commitments: Financial support obligations
• Allowance/Bad Debt Information: Credit loss effects on related balances
• KMP Compensation: Compensation categories for management

Sample application

Suppose a company sells CU 600,000 to an associate and has a receivable of CU 100,000, unsecured, with an allowance of CU 5,000.

A complete disclosure package would show: – associate relationship, – CU 600,000 sales, – CU 100,000 receivable, – unsecured terms, – CU 5,000 allowance, – any guarantees or commitments if applicable.

Common mistakes

• Disclosing only transaction volume
• Omitting balances and terms
• Ignoring zero-price support transactions
• Forgetting to disclose parent relationships when no transaction occurred

Limitations

This is a practical framework, not a substitute for reading the standard and applying materiality.

12. Algorithms / Analytical Patterns / Decision Logic

IAS 24 is not an algorithmic trading term, but it does involve structured decision logic.

12.1 Related-party identification decision tree

What it is

A rule-based sequence for deciding whether a person or entity is related.

Why it matters

Completeness of the party list is the biggest practical challenge.

When to use it

At onboarding of vendors/customers, during month-end and year-end close, and before board approvals.

Suggested logic

1. Is the counterparty a person or an entity?
2. Does the party control, jointly control, or significantly influence the reporting entity?
3. Is the party part of key management of the entity or its parent?
4. Is the party a close family member of such a person?
5. Is the entity controlled or jointly controlled by such a person or family member?
6. Is the entity part of the same group, an associate, or a joint venture relationship?
7. Is the transaction with a post-employment benefit plan?
8. If government-related, does a reduced disclosure approach apply?

Limitations

Legal structure alone may not reveal beneficial ownership or informal influence.

12.2 Disclosure completeness checklist

What it is

A structured review of what must be disclosed once a related party is identified.

Why it matters

Many disclosures fail not on identification, but on missing balances, terms, commitments, or impairment data.

When to use it

At financial statement drafting stage and audit review stage.

Checklist logic

For each identified related party, ask: – Was there any transaction? – Was there any outstanding balance? – Any