Deck 21: Related Party Disclosures

Question 1

Which of the following transactions are not related party transactions for an entity?
I. An employee purchased the entity's products on normal trading terms.
II. A subsidiary of the entity supplied raw materials to the entity.
III. The entity lent money to one of its directors.
IV. The entity made an agreement with a trade union about increase in employee's wages.

A) I and II only.
B) II and III only.
C) I and IV only.
D) III and IV only.

Answer 1

I and IV only.

Question 2

An entity is related to a reporting entity if any of the following conditions apply, except:

A) both entities are joint venture of the same third party.
B) the entity is the subsidiary of the reporting entity.
C) the reporting entity has significant economic dependence on the entity.
D) the entity is a post-employment benefit plan for the reporting entity's employees.

Answer 2

C

Question 3

According to AASB 124, related party disclosures are required irrespective of whether there have been related party transactions when:

A) control exists.
B) significant influence exists.
C) economic dependence exists.
D) all of the above.

Answer 3

A

Question 4

Amy Limited and Sheldon Limited are the two subsidiaries of Big Bang Company. Leonard, one of the directors of Big Bang Company, is also a director of Sheldon Limited. Leonard's wife, Penny, has 10% shareholding in Sheldon Limited. Which of the following are related parties to Amy Limited?

A) Big Bang Company and Sheldon Limited.
B) Big Bang Company and Leonard.
C) Sheldon Limited and Leonard.
D) Leonard and Penny.

Question 5

Two entities are not regarded as related parties simply because:

A) one entity is a subsidiary of the other entity.
B) one entity is a post- employment benefit plan for the other entity.
C) a member of the key management personnel of one entity controls the other entity.
D) a member of the key management personnel of one entity has significant influence over the other entity.

Question 6

Flower Limited is a listed company operating in the retail industry with three business units: Aster, Rose, and Jasmine. Which of the following is likely to be the key management personnel of Flower Limited?

A) The company's auditor.
B) The company's IT manager.
C) The general manager of Aster.
D) The managing director's personal assistant.

Question 7

Which of the following are most likely to be considered as key management personnel of an entity? $\begin{array}{|l|l|l|l|}\hline \text { I. } & \text { Chief Financial Officer } & \text { III. } & \text { Non-executive directors } \\\hline \text { II. } & \text { Admin Officer } & \text { IV. } & \text { General manager } \\\hline\end{array}$

A) I, II and III.
B) II, III and IV.
C) I, III and IV.
D) I, II, III and IV.

Question 8

The power to participate in the financial and operating policy decisions of an entity is known as:

A) control.
B) joint control.
C) share ownership.
D) significant influence.

Question 9

Howard is one of the directors of Chester Limited. In the current financial year, Chester Limited paid $60 000 to Longfield Agency, where Howard's brother works, for the consultancy services it provided. In addition, Chester Limited also paid $4000 to Howard for a once-off consultancy he provided on a specific project. Which of the following statements describes the relationship between Howard, Chester Limited, and Longfield Agency?

A) Howard is not a related party to Chester Limited.
B) Longfield Agency is a related party to Chester Limited.
C) The $4 000 consultancy fee is not a related party transaction.
D) The $60 000 consultancy fee is not a related party transaction.

Question 10

Chris holds an investment in Lee Limited that gives him a significant influence over the company. Chris's daughter, Chloe, also has a significant influence over another entity, Chang Limited. What is the relationship between Lee Limited and Chang Limited?

A) Lee Limited has a significant influence over Chang Limited.
B) Lee Limited and Chang Limited are not related parties.
C) Lee Limited is a related party of Chang Limited.
D) Lee Limited has control over Chang Limited.

Question 11

Amanda is one of the directors in Lions Limited, which is one of the subsidiaries of Harrisville Limited. She also has a joint control with Barry in Zephyr Limited. In this circumstance, the following are related parties to Lions Limited, except for:

A) Barry.
B) Amanda.
C) Harrisville Limited.
D) Zephyr Limited.

Question 12

Jack is a non-executive director of Shanghi Limited and Jiang Limited. Jack's wife, Sarah, is a non-executive director of Huang Limited. Which of the following statements is correct?

A) Sarah is a related party to Jiang Limited.
B) Jack is not a related party to Shanghi Limited.
C) Shanghi Limited and Huang Limited are related parties.
D) Shanghi Limited and Jiang Limited are not related parties.

Question 13

Larry is the owner and founder of Manchester Limited. Larry's wife, Katie, has a controlling investment in Hudson Limited. Which of the following describes the relationship between Manchester Limited and Hudson Limited?

A) No disclosure about transactions with Hudson Limited is required in the financial statements of Manchester Limited.
B) Manchester Limited and Hudson Limited are not related parties.
C) Manchester Limited is a related party of Hudson Limited.
D) Manchester Limited has control over Hudson Limited.

Question 14

Barry Allen is one of the non-executive directors of Rose Company. In this current financial year, Rose Company had transactions with the following entities:
I. Borrowed money from City Bank.
II. Purchased raw materials from Arrow Company.
III. Loaned money to one of its subsidiaries, Firestorm Company, with 10% per annum.
IV. Sold products to Star Labs Company, of which Barry Allen is also a director.
Which transactions are not related party transactions between Rose Company and another entity?

A) I and II only.
B) I, II and IV.
C) II and III only.
D) II, III, and IV.

Question 15

AASB 124 shall be applied in identifying the following, except for:

A) insider trading with related parties.
B) related party relationships and transactions.
C) circumstances in which disclosures of transactions with related parties are required.
D) outstanding balances, including commitments, between an entity and its related parties.

Question 16

An entity in which an investor has significant influence is known as a/an:

A) associate.
B) subsidiary.
C) related party.
D) joint venture.

Question 17

Thompson Limited is a subsidiary of Victor Limited. Which of the following is not a related party to Thompson Limited?

A) A pension scheme that offers benefits to employees of Thompson Limited.
B) The Managing Director of Victor Limited.
C) A distributor of Thompson Limited's products.
D) An associate of Thompson Limited.

Question 18

Which of the following is the related party of a reporting entity within the scope of AASB 124?

A) A supplier of the reporting entity.
B) Another subsidiary of the reporting entity's parent.
C) The domestic partner of a director of the reporting entity.
D) The non-dependent children of the reporting entity's CEO.

Question 19

The following remuneration categories must be disclosed for key management personnel, except for:

A) share-based payments.
B) bonus payments.
C) post-employment benefits.
D) termination benefits.

Question 20

The contractually agreed sharing of control over an economic entity is known as:

A) joint venture.
B) joint control.
C) significant influence.
D) significant control.

Question 21

A government entity controls both James Limited and Claire Limited. Collum Limited and Dougall Limited are the subsidiaries of James Limited. Frank Randall is the managing director of James Limited. James Limited can apply the partial exemption disclosures in paragraph 25 of AASB 124 to transactions with the following parties, except for:

A) Frank Randall.
B) Claire Limited.
C) Collum Limited.
D) the government entity.

Question 22

The minimum disclosures for related party transactions include the following, except:

A) the amount of transactions.
B) the key management personnel of the related party.
C) the amount of the outstanding balances and commitments.
D) provision of doubtful debts related to outstanding balances.

Question 23

Walton Co is a government agency that controls Science Limited. Science Limited has two subsidiaries: Physics Limited and Biology Limited. To which entities can Physics Limited apply the disclosure exemption in paragraph 25 of AASB 124?

A) Science Limited only.
B) Walton Co Limited only.
C) Science Limited and Biology Limited only.
D) Walton Co Limited, Science Limited and Biology Limited.

Question 24

If an entity chooses to apply the disclosure exemption in paragraph 25 of AASB 124, it is still required to do the following, except:

A) identify the government to which it is related.
B) disclose the nature of the relationship with the government-related entities.
C) the nature and amount of every transaction with government-related entities.
D) a qualitative or a quantitative indication of the extent of other transactions that are collectively significant.

Question 25

Kelly is the general manager of Ned Limited and is considered to be the member of key management personnel. The following transactions occurred between Kelly and Ned Limited: Kelly purchased a product of Ned Limited on normal trading terms;
Kelly received remuneration from Ned Limited amounting to $400 000;
Ned Limited issued 80 000 options to Kelly, which can be converted into Ned Limited's shares if target profit margin of 25% is achieved in the next three years.
Which of the above transactions must be disclosed as related party transactions?

A) Kelly's remuneration and the grant of options.
B) The purchase of product and the grant of options.
C) The purchase of product and Kelly's remuneration.
D) All of the above transactions are related party transactions.

Question 26

In the case where financial statements of parent entity or the ultimate controlling entity are not made publicly available, the reporting entity must disclose:

A) the name of the entity's largest shareholder.
B) the level of share ownership of the next most senior parent entity.
C) the name of the next most senior parent entity whose financial statements are publicly available.
D) the reason of why the parent entity does not make its financial statements publicly available.

Question 27

Examples of related party transactions that must be disclosed include:

A) purchase or sales of goods.
B) settlement of liabilities.
C) disposal of assets.
D) all of the above.