The International Accounting Standards Board has issued a revised version of its standard for related-party transactions, simplifying the disclosure requirements and clarifying the definition of a related party.
The revised standard is effective for annual periods beginning on or after Jan. 1, 2011, with earlier application permitted.
The IASB has revised IAS 24 in response to concerns that the previous disclosure requirements and the definition of a related party were too complex and difficult to apply in practice, especially in those environments in which government control is pervasive. The revised standard addresses these concerns by providing a partial exemption for government-related entities.
Until now, if a government controlled, or significantly influenced, an entity, the entity was required to disclose information about all transactions with other entities controlled, or significantly influenced, by the same government. The revised standard still requires disclosures that are important to users of financial statements but eliminates requirements to disclose information that is costly to gather and of less value to users. It achieves this balance by requiring disclosure about these transactions only if they are individually or collectively significant.
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