Sri Lanka Accounting Standard-LKAS 24

Related Party Disclosures

LKAS 24

CONTENTS paragraphs
SRI LANKA ACCOUNTING STANDARD-LKAS 24
RELATED PARTY DISCLOSURES

OBJECTIVE 1
SCOPE 24
PURPOSE OF RELATED PARTY DISCLOSURES 58
DEFINITIONS 912
DISCLOSURES 1327
All entities 1324
Government-related entities 2527
EFFECTIVE DATE AND TRANSITION 28















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Sri Lanka Accounting Standard-LKAS 24




Related Party Disclosures




































LKAS 24

CONTENTS paragraphs
SRI LANKA ACCOUNTING STANDARD-LKAS 24
RELATED PARTY DISCLOSURES

OBJECTIVE 1
SCOPE 24
PURPOSE OF RELATED PARTY DISCLOSURES 58
DEFINITIONS 912
DISCLOSURES 1327
All entities 1324
Government-related entities 2527
EFFECTIVE DATE AND TRANSITION 28















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LKAS 24
4 Related party transactions and outstanding balances with other entities
in a group are disclosed in an entitys financial statements. Intragroup
related party transactions and outstanding balances are eliminated in the
preparation of consolidated financial statements of the group.

Purpose of related party disclosures

5 Related party relationships are a normal feature of commerce and
business. For example, entities frequently carry on parts of their
activities through subsidiaries, joint ventures and associates. In those
circumstances, the entity has the ability to affect the financial and
operating policies of the investee through the presence of control, joint
control or significant influence.

6 A related party relationship could have an effect on the profit or loss
and financial position of an entity. Related parties may enter into
transactions that unrelated parties would not. For example, an entity that
sells goods to its parent at cost might not sell on those terms to another
customer. Also, transactions between related parties may not be made at
the same amounts as between unrelated parties.

7 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. The mere existence of the relationship may be sufficient to affect
the transactions of the entity with other parties. For example, a
subsidiary may terminate relations with a trading partner on acquisition
by the parent of a fellow subsidiary engaged in the same activity as the
former trading partner. Alternatively, one party may refrain from acting
because of the significant influence of anotherfor example, a
subsidiary may be instructed by its parent not to engage in research and
development.

8 For these reasons, knowledge of an entitys transactions, outstanding
balances, including commitments and relationships with related parties
may affect assessments of its operations by users of financial
statements, including assessments of the risks and opportunities facing
the entity.

Definitions

9 The following terms are used in this Standard with the meanings
specified:

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LKAS 24
4 Related party transactions and outstanding balances with other entities
in a group are disclosed in an entitys financial statements. Intragroup
related party transactions and outstanding balances are eliminated in the
preparation of consolidated financial statements of the group.

Purpose of related party disclosures

5 Related party relationships are a normal feature of commerce and
business. For example, entities frequently carry on parts of their
activities through subsidiaries, joint ventures and associates. In those
circumstances, the entity has the ability to affect the financial and
operating policies of the investee through the presence of control, joint
control or significant influence.

6 A related party relationship could have an effect on the profit or loss
and financial position of an entity. Related parties may enter into
transactions that unrelated parties would not. For example, an entity that
sells goods to its parent at cost might not sell on those terms to another
customer. Also, transactions between related parties may not be made at
the same amounts as between unrelated parties.

7 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. The mere existence of the relationship may be sufficient to affect
the transactions of the entity with other parties. For example, a
subsidiary may terminate relations with a trading partner on acquisition
by the parent of a fellow subsidiary engaged in the same activity as the
former trading partner. Alternatively, one party may refrain from acting
because of the significant influence of anotherfor example, a
subsidiary may be instructed by its parent not to engage in research and
development.

8 For these reasons, knowledge of an entitys transactions, outstanding
balances, including commitments and relationships with related parties
may affect assessments of its operations by users of financial
statements, including assessments of the risks and opportunities facing
the entity.

Definitions

9 The following terms are used in this Standard with the meanings
specified:

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LKAS 24
A related party is a person or entity that is related to the entity that
is preparing its financial statements (in this Standard referred to as
the reporting entity).

(a) A person or a close member of that persons family is related
to a reporting entity if that person:

(i) has control or joint control over the reporting entity;

(ii) has significant influence over the reporting entity; or

(iii) is a member of the key management personnel of the
reporting entity or of a parent of the reporting entity.

(b) An entity is related to a reporting entity if any of the following
conditions applies:

(i) The entity and the reporting entity are members of the
same group (which means that each parent, subsidiary
and fellow subsidiary is related to the others).

(ii) One entity is an associate or joint venture of the other
entity (or an associate or joint venture of a member of a
group of which the other entity is a member).

(iii) Both entities are joint ventures of the same third party.

(iv) One entity is a joint venture of a third entity and the
other entity is an associate of the third entity.

(v) The entity is a post-employment benefit plan for the
benefit of employees of either the reporting entity or an
entity related to the reporting entity. If the reporting
entity is itself such a plan, the sponsoring employers are
also related to the reporting entity.

(vi) The entity is controlled or jointly controlled by a person
identified in (a).

(vii) A person identified in (a)(i) has significant influence
over the entity or is a member of the key management
personnel of the entity (or of a parent of the entity).

LKAS 24
A related party transaction is a transfer of resources, services or
obligations between a reporting entity and a related party,
regardless of whether a price is charged.

Close members of the family of a person are those family members
who may be expected to influence, or be influenced by, that person
in their dealings with the entity and include:

(a) that persons children and spouse or domestic partner;

(b) children of that persons spouse or domestic partner; and

(c) dependants of that person or that persons spouse or domestic
partner.

Compensation includes all employee benefits (as defined in LKAS
19 Employee Benefits) including employee benefits to which SLFRS
2 Share-based Payment applies. Employee benefits are all forms of
consideration paid, payable or provided by the entity, or on behalf
of the entity, in exchange for services rendered to the entity. It also
includes such consideration paid on behalf of a parent of the entity
in respect of the entity. Compensation includes:

(a) short-term employee benefits, such as wages, salaries and
social security contributions, paid annual leave and paid sick
leave, profit-sharing and bonuses (if payable within twelve
months of the end of the period) and non-monetary benefits
(such as medical care, housing, cars and free or subsidised
goods or services) for current employees;

(b) post-employment benefits such as pensions, other retirement
benefits, post-employment life insurance and post-
employment medical care;

(c) other long-term employee benefits, including long-service
leave or sabbatical leave, jubilee or other long-service
benefits, long-term disability benefits and, if they are not
payable wholly within twelve months after the end of the
period, profit-sharing, bonuses and deferred compensation;

(d) termination benefits; and

(e) share-based payment.

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LKAS 24
A related party is a person or entity that is related to the entity that
is preparing its financial statements (in this Standard referred to as
the reporting entity).

(a) A person or a close member of that persons family is related
to a reporting entity if that person:

(i) has control or joint control over the reporting entity;

(ii) has significant influence over the reporting entity; or

(iii) is a member of the key management personnel of the
reporting entity or of a parent of the reporting entity.

(b) An entity is related to a reporting entity if any of the following
conditions applies:

(i) The entity and the reporting entity are members of the
same group (which means that each parent, subsidiary
and fellow subsidiary is related to the others).

(ii) One entity is an associate or joint venture of the other
entity (or an associate or joint venture of a member of a
group of which the other entity is a member).

(iii) Both entities are joint ventures of the same third party.

(iv) One entity is a joint venture of a third entity and the
other entity is an associate of the third entity.

(v) The entity is a post-employment benefit plan for the
benefit of employees of either the reporting entity or an
entity related to the reporting entity. If the reporting
entity is itself such a plan, the sponsoring employers are
also related to the reporting entity.

(vi) The entity is controlled or jointly controlled by a person
identified in (a).

(vii) A person identified in (a)(i) has significant influence
over the entity or is a member of the key management
personnel of the entity (or of a parent of the entity).

LKAS 24
A related party transaction is a transfer of resources, services or
obligations between a reporting entity and a related party,
regardless of whether a price is charged.

Close members of the family of a person are those family members
who may be expected to influence, or be influenced by, that person
in their dealings with the entity and include:

(a) that persons children and spouse or domestic partner;

(b) children of that persons spouse or domestic partner; and

(c) dependants of that person or that persons spouse or domestic
partner.

Compensation includes all employee benefits (as defined in LKAS
19 Employee Benefits) including employee benefits to which SLFRS
2 Share-based Payment applies. Employee benefits are all forms of
consideration paid, payable or provided by the entity, or on behalf
of the entity, in exchange for services rendered to the entity. It also
includes such consideration paid on behalf of a parent of the entity
in respect of the entity. Compensation includes:

(a) short-term employee benefits, such as wages, salaries and
social security contributions, paid annual leave and paid sick
leave, profit-sharing and bonuses (if payable within twelve
months of the end of the period) and non-monetary benefits
(such as medical care, housing, cars and free or subsidised
goods or services) for current employees;

(b) post-employment benefits such as pensions, other retirement
benefits, post-employment life insurance and post-
employment medical care;

(c) other long-term employee benefits, including long-service
leave or sabbatical leave, jubilee or other long-service
benefits, long-term disability benefits and, if they are not
payable wholly within twelve months after the end of the
period, profit-sharing, bonuses and deferred compensation;

(d) termination benefits; and

(e) share-based payment.

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LKAS 24
Control is the power to govern the financial and operating policies
of an entity so as to obtain benefits from its activities.

Joint control is the contractually agreed sharing of control over an
economic activity.

Key management personnel are those persons having authority and
responsibility for planning, directing and controlling the activities
of the entity, directly or indirectly, including any director (whether
executive or otherwise) of that entity.

Significant influence is the power to participate in the financial and
operating policy decisions of an entity, but is not control over those
policies. Significant influence may be gained by share ownership,
statute or agreement.

Government refers to government, government agencies and similar
bodies whether local, national or international.

A government-related entity is an entity that is controlled, jointly
controlled or significantly influenced by a government.

10 In considering each possible related party relationship, attention is
directed to the substance of the relationship and not merely the legal
form.

11 In the context of this Standard, the following are not related parties:

(a) two entities simply because they have a director or other member
of key management personnel in common or because a member
of key management personnel of one entity has significant
influence over the other entity.

(b) two venturers simply because they share joint control over a joint
venture.

(c) (i) providers of finance,

(ii) trade unions,

(iii) public utilities, and

LKAS 24
(iv) departments and agencies of a government that does not
control, jointly control or significantly influence the
reporting entity,

simply by virtue of their normal dealings with an entity (even
though they may affect the freedom of action of an entity or
participate in its decision-making process).

(d) a customer, supplier, franchisor, distributor or general agent with
whom an entity transacts a significant volume of business, simply
by virtue of the resulting economic dependence.

12 In the definition of a related party, an associate includes subsidiaries of
the associate and a joint venture includes subsidiaries of the joint
venture. Therefore, for example, an associates subsidiary and the
investor that has significant influence over the associate are related to
each other.

Disclosures

All entities

13 Relationships between a parent and its subsidiaries shall be
disclosed irrespective of whether there have been transactions
between them. An entity shall disclose the name of its parent and, if
different, the ultimate controlling party. If neither the entitys
parent nor the ultimate controlling party produces consolidated
financial statements available for public use, the name of the next
most senior parent that does so shall also be disclosed.

14 To enable users of financial statements to form a view about the effects
of related party relationships on an entity, it is appropriate to disclose
the related party relationship when control exists, irrespective of
whether there have been transactions between the related parties.

15 The requirement to disclose related party relationships between a parent
and its subsidiaries is in addition to the disclosure requirements in
LKAS 27, LKAS 28 Investments in Associates and LKAS 31 Interests
in Joint Ventures.

16 Paragraph 13 refers to the next most senior parent. This is the first
parent in the group above the immediate parent that produces
consolidated financial statements available for public use.
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LKAS 24
Control is the power to govern the financial and operating policies
of an entity so as to obtain benefits from its activities.

Joint control is the contractually agreed sharing of control over an
economic activity.

Key management personnel are those persons having authority and
responsibility for planning, directing and controlling the activities
of the entity, directly or indirectly, including any director (whether
executive or otherwise) of that entity.

Significant influence is the power to participate in the financial and
operating policy decisions of an entity, but is not control over those
policies. Significant influence may be gained by share ownership,
statute or agreement.

Government refers to government, government agencies and similar
bodies whether local, national or international.

A government-related entity is an entity that is controlled, jointly
controlled or significantly influenced by a government.

10 In considering each possible related party relationship, attention is
directed to the substance of the relationship and not merely the legal
form.

11 In the context of this Standard, the following are not related parties:

(a) two entities simply because they have a director or other member
of key management personnel in common or because a member
of key management personnel of one entity has significant
influence over the other entity.

(b) two venturers simply because they share joint control over a joint
venture.

(c) (i) providers of finance,

(ii) trade unions,

(iii) public utilities, and

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(iv) departments and agencies of a government that does not
control, jointly control or significantly influence the
reporting entity,

simply by virtue of their normal dealings with an entity (even
though they may affect the freedom of action of an entity or
participate in its decision-making process).

(d) a customer, supplier, franchisor, distributor or general agent with
whom an entity transacts a significant volume of business, simply
by virtue of the resulting economic dependence.

12 In the definition of a related party, an associate includes subsidiaries of
the associate and a joint venture includes subsidiaries of the joint
venture. Therefore, for example, an associates subsidiary and the
investor that has significant influence over the associate are related to
each other.

Disclosures

All entities

13 Relationships between a parent and its subsidiaries shall be
disclosed irrespective of whether there have been transactions
between them. An entity shall disclose the name of its parent and, if
different, the ultimate controlling party. If neither the entitys
parent nor the ultimate controlling party produces consolidated
financial statements available for public use, the name of the next
most senior parent that does so shall also be disclosed.

14 To enable users of financial statements to form a view about the effects
of related party relationships on an entity, it is appropriate to disclose
the related party relationship when control exists, irrespective of
whether there have been transactions between the related parties.

15 The requirement to disclose related party relationships between a parent
and its subsidiaries is in addition to the disclosure requirements in
LKAS 27, LKAS 28 Investments in Associates and LKAS 31 Interests
in Joint Ventures.

16 Paragraph 13 refers to the next most senior parent. This is the first
parent in the group above the immediate parent that produces
consolidated financial statements available for public use.
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LKAS 24
17 An entity shall disclose key management personnel compensation in
total and for each of the following categories:

(a) short-term employee benefits;

(b) post-employment benefits;

(c) other long-term benefits;

(d) termination benefits; and

(e) share-based payment.

18 If an entity has had related party transactions during the periods
covered by the financial statements, it shall disclose the nature of
the related party relationship as well as information about those
transactions and outstanding balances, including commitments,
necessary for users to understand the potential effect of the
relationship on the financial statements. These disclosure
requirements are in addition to those in paragraph 17. At a
minimum, disclosures shall include:

(a) the amount of the transactions;

(b) the amount of outstanding balances, including commitments,
and:

(i) their terms and conditions, including whether they are
secured, and the nature of the consideration to be
provided in settlement; and

(ii) details of any guarantees given or received;

(c) provisions for doubtful debts related to the amount of
outstanding balances; and

(d) the expense recognised during the period in respect of bad or
doubtful debts due from related parties.

19 The disclosures required by paragraph 18 shall be made separately
for each of the following categories:

(a) the parent;

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(b) entities with joint control or significant influence over the
entity;

(c) subsidiaries;

(d) associates;

(e) joint ventures in which the entity is a venturer;

(f) key management personnel of the entity or its parent; and

(g) other related parties.

20 The classification of amounts payable to, and receivable from, related
parties in the different categories as required in paragraph 19 is an
extension of the disclosure requirement in LKAS 1 Presentation of
Financial Statements for information to be presented either in the
statement of financial position or in the notes. The categories are
extended to provide a more comprehensive analysis of related party
balances and apply to related party transactions.

21 The following are examples of transactions that are disclosed if they are
with a related party:

(a) purchases or sales of goods (finished or unfinished);

(b) purchases or sales of property and other assets;

(c) rendering or receiving of services;

(d) leases;

(e) transfers of research and development;

(f) transfers under licence agreements;

(g) transfers under finance arrangements (including loans and equity
contributions in cash or in kind);

(h) provision of guarantees or collateral;

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LKAS 24
17 An entity shall disclose key management personnel compensation in
total and for each of the following categories:

(a) short-term employee benefits;

(b) post-employment benefits;

(c) other long-term benefits;

(d) termination benefits; and

(e) share-based payment.

18 If an entity has had related party transactions during the periods
covered by the financial statements, it shall disclose the nature of
the related party relationship as well as information about those
transactions and outstanding balances, including commitments,
necessary for users to understand the potential effect of the
relationship on the financial statements. These disclosure
requirements are in addition to those in paragraph 17. At a
minimum, disclosures shall include:

(a) the amount of the transactions;

(b) the amount of outstanding balances, including commitments,
and:

(i) their terms and conditions, including whether they are
secured, and the nature of the consideration to be
provided in settlement; and

(ii) details of any guarantees given or received;

(c) provisions for doubtful debts related to the amount of
outstanding balances; and

(d) the expense recognised during the period in respect of bad or
doubtful debts due from related parties.

19 The disclosures required by paragraph 18 shall be made separately
for each of the following categories:

(a) the parent;

LKAS 24
(b) entities with joint control or significant influence over the
entity;

(c) subsidiaries;

(d) associates;

(e) joint ventures in which the entity is a venturer;

(f) key management personnel of the entity or its parent; and

(g) other related parties.

20 The classification of amounts payable to, and receivable from, related
parties in the different categories as required in paragraph 19 is an
extension of the disclosure requirement in LKAS 1 Presentation of
Financial Statements for information to be presented either in the
statement of financial position or in the notes. The categories are
extended to provide a more comprehensive analysis of related party
balances and apply to related party transactions.

21 The following are examples of transactions that are disclosed if they are
with a related party:

(a) purchases or sales of goods (finished or unfinished);

(b) purchases or sales of property and other assets;

(c) rendering or receiving of services;

(d) leases;

(e) transfers of research and development;

(f) transfers under licence agreements;

(g) transfers under finance arrangements (including loans and equity
contributions in cash or in kind);

(h) provision of guarantees or collateral;

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LKAS 24
(a) the name of the government and the nature of its relationship
with the reporting entity (ie control, joint control or
significant influence);

(b) the following information in sufficient detail to enable users of
the entitys financial statements to understand the effect of
related party transactions on its financial statements:

(i) the nature and amount of each individually significant
transaction; and

(ii) for other transactions that are collectively, but not
individually, significant, a qualitative or quantitative
indication of their extent.Types of transactions include
those listed in paragraph 21.

27 In using its judgement to determine the level of detail to be disclosed in
accordance with the requirements in paragraph 26(b), the reporting
entity shall consider the closeness of the related party relationship and
other factors relevant in establishing the level of significance of the
transaction such as whether it is:

(a) significant in terms of size;

(b) carried out on non-market terms;

(c) outside normal day-to-day business operations, such as the
purchase and sale of businesses;

(d) disclosed to regulatory or supervisory authorities;

(e) reported to senior management;

(f) subject to shareholder approval.

Effective date and transition

28 An entity shall apply this Standard retrospectively for annual periods
beginning on or after 1 January 2013. Earlier application is permitted,
either of the whole Standard or of the partial exemption in paragraphs
2527 for government-related entities. If an entity applies either the
whole Standard or that partial exemption for a period beginning before
1 January 2013, it shall disclose that fact.

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LKAS 24
(a) the name of the government and the nature of its relationship
with the reporting entity (ie control, joint control or
significant influence);

(b) the following information in sufficient detail to enable users of
the entitys financial statements to understand the effect of
related party transactions on its financial statements:

(i) the nature and amount of each individually significant
transaction; and

(ii) for other transactions that are collectively, but not
individually, significant, a qualitative or quantitative
indication of their extent.Types of transactions include
those listed in paragraph 21.

27 In using its judgement to determine the level of detail to be disclosed in
accordance with the requirements in paragraph 26(b), the reporting
entity shall consider the closeness of the related party relationship and
other factors relevant in establishing the level of significance of the
transaction such as whether it is:

(a) significant in terms of size;

(b) carried out on non-market terms;

(c) outside normal day-to-day business operations, such as the
purchase and sale of businesses;

(d) disclosed to regulatory or supervisory authorities;

(e) reported to senior management;

(f) subject to shareholder approval.

Effective date and transition

28 An entity shall apply this Standard retrospectively for annual periods
beginning on or after 1 January 2013. Earlier application is permitted,
either of the whole Standard or of the partial exemption in paragraphs
2527 for government-related entities. If an entity applies either the
whole Standard or that partial exemption for a period beginning before
1 January 2013, it shall disclose that fact.