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Editorial Board on Accounts and Audit
  • Related Parties

    by Gautam on Sunday, October 20, 2019 at 03:14 AM

    Dear Sir, Mr.A is a Director of A Ltd & Mr.A holds 60% of shares of B Ltd. Then as per AS-18 , A & B Ltd are related party. Query- If A Ltd sold goods to B Ltd, then Whether reporting under AS-18,is required in books of both A & B Ltd ?? 2) Mr. Ram is director of X Ltd. His wife Mrs Ram holds 60% share of Y Ltd. Query- Whether X & Y Ltd will be related party ? 3) Whether reporting under AS-18 requires if Rent is paid to wife of director ??

    Replied byEditorial Board Tuesday, November 05, 2019 at 04:32 PM

    Para 23 of AS 18 provides that if there have been transactions between related parties; the name of the related party, description of the relationship & nature if transactions with related parties, volume of the transactions and etc. should be disclosed in the financial statements. So, in your case, both A Ltd. and B Ltd. should disclose the transaction of sale of goods by A Ltd. to B Ltd.

    Further, an entity is considered as related party of reporting entity if key management personnel of the reporting entity or/and relative of such personnel is able to exercise significant influence on the other entity. In your case, assuming Mr. Ram is a key management personnel, X Ltd. and Y Ltd. should be treated as related parties.

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