What is Related Party Disclosures?
Related party disclosures are notes in the financial statements that describe the nature of the relationship and the transactions between a reporting entity and its related parties. IAS 24 mandates these disclosures to help users understand the potential impact of related party relationships on the entity’s financial position and results.
How It Works
- Identify all related parties: parent, subsidiaries, associates, joint ventures, key management, and their close family.
- List transactions during the period: sales, purchases, loans, leases, guarantees.
- Disclose the nature of the relationship, transaction values, outstanding balances, and pricing terms.
- Disclose key management personnel compensation, split into the categories required by IAS 24.
Saudi Context
Saudi listed companies provide detailed related party disclosures in their annual reports, reviewed by the CMA and ZATCA. Family-owned groups, common in Saudi Arabia, often have extensive related party transactions that require careful documentation in line with transfer pricing rules.
Example
A Saudi group discloses SAR 12 million sales to a sister company, SAR 5 million loans to its parent, and SAR 3 million key management compensation. The notes specify pricing terms and outstanding balances at year-end.