Related parties

Related parties are entities or persons that are related to the entity preparing the financial statements. Related parties may include the entity’s parent, subsidiaries, associates, joint ventures, and directors, key management personnel, and their immediate families.

Related parties may also include entities or persons that have the ability to exercise significant influence over the entity, such as major shareholders, close members of the entity’s governing body, or other entities or persons that have a close relationship with the entity.

The definition of related parties and the identification of related parties are important in the preparation of the financial statements, as transactions with related parties may be subject to special disclosure requirements and may require special accounting treatment to ensure that they are presented in a consistent and transparent manner.

You should refer to the accounting standards for the precise definitions.

By Mohammed Haque

Mohammed is a chartered accountant (ICAEW) with many years of experience in dealing with complex audit, accounting and tax matters.