1. PwC T RANSFORM  Changing business by changing behaviour Related Party Transactions Sujeewa Mudalige

2. 2 PwC T RANSFORM  Overview of session 1. Introduction 2. Recognition 3. Disclosure 4. New developments

3. PwC T RANSFORM  Changing business by changing behaviour Related Party Disclosures Introduction

4. 4 PwC T RANSFORM  Scope of IAS 24 / LKAS 24 Parties are related if one party can control or exercise significant influence over the other IAS 24 covers those parties which are related and details a number of exclusions Disclosure is required for: –Upwards and downwards control relationships –Details of the transactions

5. PwC T RANSFORM  Changing business by changing behaviour Related Party Disclosures Recognition

6. 6 PwC T RANSFORM  Determining related parties Determining Related Parties Control Significant influence  Parents  Subsidiaries  Fellow subsidiaries  Joint ventures  Other entities controlled by owners or key management Key management personnel

7. 7 PwC T RANSFORM  Examples of related party transactions  Sales and purchases of good and services  Balances arising as a result at the Balance Sheet date  Loans, commitments and contingencies  Transactions with directors  Bank loans and collateral  Agency arrangements  Share capital transactions

8. 8 PwC T RANSFORM  Exclusions 7Providers of finance 7Trade Unions 7Public utilities 7Government departments and agencies 7Single suppliers / customers / franchises / distributors unless a specific relationship exists 7Entities with a director in common unless that director has the ability to direct or significantly influence

9. 9 PwC T RANSFORM  Exemptions  Stand alone financial statements of a parent if consolidated statements are available  Financial statements of a wholly owned subsidiary if parent incorporated in the same country and providing financial statements  Intra-group transactions that have been eliminated on consolidation  State controlled entities

10. 10 PwC T RANSFORM  Related parties for only part of the year Company A acquires 25% of Company B, regular supplier, on 1/9/20XX for which it equity accounts. During the year ended 31/12/20XX Company B makes sales to A of 2,000. The total sales till 1/9/20XX were 1,100. The companies are related from 1/9/20XX and 900 should be disclosed as a related party transaction.

11. PwC T RANSFORM  Changing business by changing behaviour Related Party Disclosures Measurement

12. 12 PwC T RANSFORM  Measuring transactions Arm’s length Cost Cost plus Resale priceFree of charge Methods

13. PwC T RANSFORM  Changing business by changing behaviour Related Party Disclosures Disclosure

14. 14 PwC T RANSFORM  Disclosures  Nature of the relationships  Types of transaction  Volume and value of the transaction  Pricing policies  Balances at year end

15. 15 PwC T RANSFORM  Improvements project (1) Related party definition clarified to include –Parties with joint control over entity –Joint ventures –Post-employment benefit plan Significant influence definition - conformed to IAS / LKAS 28 Wholly owned subsidiary – exemption no longer limited to parent in same country State-controlled entities no longer exempt

16. 16 PwC T RANSFORM  Improvements project (2) No longer sufficient to disclose proportions of transactions / balances –must disclose full amounts Additional disclosures by category of related party : –Terms and conditions (security / consideration) –Guarantees given / received –Provisions for doubtful debts (incl P/L expense) –Settlement of liabilities on behalf of entity Pricing policies / management compensation cost not required