Question Tag: IAS 24

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  • 7 Marks

CR – May 2016 – L3 – Q7a – Related Party Disclosures (IAS 24)

Discuss the appropriate disclosure of related party transactions and director remuneration under IAS 24 for IBRO Plc.

a) IBRO Plc provided the remuneration of its management board made up of executive and non-executive directors (including 2 foreign nationals) as follows:

  • Annual basic salary
  • Bonus scheme (Annual compensation)

Four of the directors of IBRO Plc obtained loans from the company at concessional rates, while 2 directors are part of the bondholders of the company’s loan stock with convertible features to their advantage.

In the group financial statements, with the related parties note under IAS 24 – Related Party Disclosures, IBRO Plc disclosed the total remuneration paid to directors and non-executive directors. No further breakdown of the remuneration was provided. The remuneration of the non-executive directors, however, was not included in the key management disclosures.

IBRO Plc was of the opinion that in its jurisdiction, providing information about individual director’s remunerations would be a disservice to them, especially because they have served the company meritoriously. Consequently, the CFO of the company is proposing to disclose the related party information in the annual financial statements in an ambiguous manner to prevent users of the financial statements from linking remuneration information to specific individual directors.

Required:
Discuss the appropriate disclosure for the above transactions within the context of IAS 24 – Related Party Disclosures in the financial statements of IBRO Plc for the year ended December 31, 2014.

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  • 6 Marks

CR – Nov 2020 – L3 – Q4c – Related Party Disclosures (IAS 24)

Identify and discuss three key areas of disclosures required by group companies in their financial statements under IAS 24.

c. The objective of IAS 24 – Related party disclosure, is to ensure that an entity‘s financial statements contain sufficient disclosures to draw attention to the possibility that the entity‘s financial position or profit or loss may have been affected by the existence of related parties.

Required: Identify and discuss THREE key areas of disclosures required by group companies in their financial statements. (6 Marks)

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  • 5 Marks

CR – May 2021 – L3 – Q3b – Related Party Disclosures for Government Entities

Advice on related party disclosure requirements for government-controlled GHBank Ltd.

GHBank Ltd is a government-controlled bank. GHBank Ltd was taken over by the government of Ghana during the recent financial sector clean-up by the Bank of Ghana. GHBank Ltd does not directly trade with other government-controlled banks but has underwritten the development of the nationally owned postal service and the newly created railway ministry. The directors of GHBank Ltd are concerned about the volume and cost of disclosing its related party interests because they extend theoretically to all other government-controlled enterprises and banks. The directors require general advice on the nature and importance of the disclosure of related party relationships and specific advice on the disclosure of the above relationships in the financial statements.

Required:
Advise the directors of the company on how to deal with the above transaction in the financial statements in accordance with IAS 24: Related Party Disclosures. (5 marks)

 

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  • 5 Marks

CR – May 2019 – L3 – Q2e – Presentation of financial statements (IAS 1, IAS 34, IFRS 8, IAS 24, IAS 10)

The question requires the identification of related parties for Bongo Designs and an explanation of why each is a related party, according to IAS 24.

Bongo Designs is the parent company of a small group. Its shares are stock market quoted, with many shareholders. Only one shareholder, Akwasi Boakye, has a holding over 5%. Akwasi Boakye holds 20% of the shares and was the founder of the company. He still retains a seat on the board which is made up of four executive directors (including himself) and two non-executive directors.

Akwasi Boakye’s domestic live-in partner of ten years, Abena Lamptey, recently set up a company, Gushegu Ltd, in the textile industry with a friend, Akosua Pokuaa. Abena Lamptey and Akosua Pokuaa each own 50% of the shares of Gushegu Ltd, and decisions are made jointly under a contract that both parties signed.

Bongo Designs has two subsidiaries, Zabzugu Fabrics which is 100% owned and Binduri Textiles which is 60% owned. The other 40% of Binduri Textiles is owned by a single shareholder, Innovative Sissala, which has two seats on Binduri Textiles’s five-member board. Yaw Abdulai is the Finance Director of Zabzugu Fabrics. He is also the person responsible for finance at the group level but is not a member of the group’s board.

Required:
In accordance with IAS 24: Related Party Disclosures, identify the related parties of Bongo Designs in the above scenario, explaining why each is a related party. (5 marks)

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  • 4 Marks

CR – Nov 2016 – L3 – Q2e – Other information in the annual report

Determine the classification and disclosure of related party transactions for Mane Ltd in accordance with IAS 24

Mane Ltd is an entity specializing in importing a wide range of non-food items and selling them to retailers. Aqeel is Mane’s CEO and founder and owns 40% of Mane’s equity shares:

i) Mane’s largest customer, Zico, accounts for 35% of Mane’s revenue. Zico has just completed negotiations with Mane for a special 5% discount on all sales.
ii) During the accounting period, Aqeel purchased a property from Mane for GH¢500,000. Mane had previously declared the property surplus to its requirements and had valued it at GH¢750,000.
iii) Aqeel’s son, Sherif, is a director in a financial institution, Cheap Capital. During the accounting period, Cheap Capital advanced GH¢2 million to Mane as an unsecured loan at a favorable rate of interest.

Required:
Explain, with reasons, the extent to which each of the above transactions should be classified and disclosed in accordance with IAS 24 Related Party Disclosures in Mane’s financial statements for the period.
(4 marks)

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  • 7 Marks

CR – May 2016 – L3 – Q7a – Related Party Disclosures (IAS 24)

Discuss the appropriate disclosure of related party transactions and director remuneration under IAS 24 for IBRO Plc.

a) IBRO Plc provided the remuneration of its management board made up of executive and non-executive directors (including 2 foreign nationals) as follows:

  • Annual basic salary
  • Bonus scheme (Annual compensation)

Four of the directors of IBRO Plc obtained loans from the company at concessional rates, while 2 directors are part of the bondholders of the company’s loan stock with convertible features to their advantage.

In the group financial statements, with the related parties note under IAS 24 – Related Party Disclosures, IBRO Plc disclosed the total remuneration paid to directors and non-executive directors. No further breakdown of the remuneration was provided. The remuneration of the non-executive directors, however, was not included in the key management disclosures.

IBRO Plc was of the opinion that in its jurisdiction, providing information about individual director’s remunerations would be a disservice to them, especially because they have served the company meritoriously. Consequently, the CFO of the company is proposing to disclose the related party information in the annual financial statements in an ambiguous manner to prevent users of the financial statements from linking remuneration information to specific individual directors.

Required:
Discuss the appropriate disclosure for the above transactions within the context of IAS 24 – Related Party Disclosures in the financial statements of IBRO Plc for the year ended December 31, 2014.

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  • 6 Marks

CR – Nov 2020 – L3 – Q4c – Related Party Disclosures (IAS 24)

Identify and discuss three key areas of disclosures required by group companies in their financial statements under IAS 24.

c. The objective of IAS 24 – Related party disclosure, is to ensure that an entity‘s financial statements contain sufficient disclosures to draw attention to the possibility that the entity‘s financial position or profit or loss may have been affected by the existence of related parties.

Required: Identify and discuss THREE key areas of disclosures required by group companies in their financial statements. (6 Marks)

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  • 5 Marks

CR – May 2021 – L3 – Q3b – Related Party Disclosures for Government Entities

Advice on related party disclosure requirements for government-controlled GHBank Ltd.

GHBank Ltd is a government-controlled bank. GHBank Ltd was taken over by the government of Ghana during the recent financial sector clean-up by the Bank of Ghana. GHBank Ltd does not directly trade with other government-controlled banks but has underwritten the development of the nationally owned postal service and the newly created railway ministry. The directors of GHBank Ltd are concerned about the volume and cost of disclosing its related party interests because they extend theoretically to all other government-controlled enterprises and banks. The directors require general advice on the nature and importance of the disclosure of related party relationships and specific advice on the disclosure of the above relationships in the financial statements.

Required:
Advise the directors of the company on how to deal with the above transaction in the financial statements in accordance with IAS 24: Related Party Disclosures. (5 marks)

 

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  • 5 Marks

CR – May 2019 – L3 – Q2e – Presentation of financial statements (IAS 1, IAS 34, IFRS 8, IAS 24, IAS 10)

The question requires the identification of related parties for Bongo Designs and an explanation of why each is a related party, according to IAS 24.

Bongo Designs is the parent company of a small group. Its shares are stock market quoted, with many shareholders. Only one shareholder, Akwasi Boakye, has a holding over 5%. Akwasi Boakye holds 20% of the shares and was the founder of the company. He still retains a seat on the board which is made up of four executive directors (including himself) and two non-executive directors.

Akwasi Boakye’s domestic live-in partner of ten years, Abena Lamptey, recently set up a company, Gushegu Ltd, in the textile industry with a friend, Akosua Pokuaa. Abena Lamptey and Akosua Pokuaa each own 50% of the shares of Gushegu Ltd, and decisions are made jointly under a contract that both parties signed.

Bongo Designs has two subsidiaries, Zabzugu Fabrics which is 100% owned and Binduri Textiles which is 60% owned. The other 40% of Binduri Textiles is owned by a single shareholder, Innovative Sissala, which has two seats on Binduri Textiles’s five-member board. Yaw Abdulai is the Finance Director of Zabzugu Fabrics. He is also the person responsible for finance at the group level but is not a member of the group’s board.

Required:
In accordance with IAS 24: Related Party Disclosures, identify the related parties of Bongo Designs in the above scenario, explaining why each is a related party. (5 marks)

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  • 4 Marks

CR – Nov 2016 – L3 – Q2e – Other information in the annual report

Determine the classification and disclosure of related party transactions for Mane Ltd in accordance with IAS 24

Mane Ltd is an entity specializing in importing a wide range of non-food items and selling them to retailers. Aqeel is Mane’s CEO and founder and owns 40% of Mane’s equity shares:

i) Mane’s largest customer, Zico, accounts for 35% of Mane’s revenue. Zico has just completed negotiations with Mane for a special 5% discount on all sales.
ii) During the accounting period, Aqeel purchased a property from Mane for GH¢500,000. Mane had previously declared the property surplus to its requirements and had valued it at GH¢750,000.
iii) Aqeel’s son, Sherif, is a director in a financial institution, Cheap Capital. During the accounting period, Cheap Capital advanced GH¢2 million to Mane as an unsecured loan at a favorable rate of interest.

Required:
Explain, with reasons, the extent to which each of the above transactions should be classified and disclosed in accordance with IAS 24 Related Party Disclosures in Mane’s financial statements for the period.
(4 marks)

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