Deck 8: Related Party Disclosures

Question 1

Dunkirk Monearmore is a publicly traded Irish investment entity. The CFO wants to invest in Killarney Entity. How much can he invest in Killarney before the two companies are related?

A) 0%
B) 49%
C) 50%
D) 100%

Answer 1

49%

Question 2

Which does not require a related party disclosure for Lawrence Construction?

A) The CEO of Lawrence is closely related to the CEO of another entity
B) A governmental body has significant influence over Lawrence Construction
C) Lawrence and Terrebonne Construction are both controlled by Edmondston Capital.
D) The CEO has a majority ownership interest in Richelieu Fabrication.
E) None of the above

Answer 2

None of the above

Question 3

Which must an entity disclose at a minimum concerning a related party?
I. Non-cash transactions
II. Cash transactions
III. Outstanding balances and commitments
IV. Provisions for doubtful accounts for the related party
V. Bad debt expenses from the related party

A) I, II, and III
B) II and III
C) IV and V
D) All of the above
E) None of the above

Answer 3

All of the above

Question 4

A person or a close member of that person's family is related to a reporting entity if that person:

A) has control or joint control of the reporting entity.
B) has significant influence over the reporting entity.
C) is a member of the key management personnel of the reporting entity or of a parent of the reporting entity.
D) all of the above

Question 5

A related party can be all of the following except

A) a person
B) a group of persons
C) a competitor's subsidiary
D) joint venture

Question 6

If entity A controls Entities B and C

A) entity A is related to entities B and C
B) entity B is related to entity A but not to entity C
C) entity C must disclose dealings with entity A but not with entity B
D) entity B is related to entity C

Question 7

IAS 24 requires the details about the relationship between parent and subsidiaries to be disclosed

A) even if no transactions between the parent and subsidiaries occurred during the reporting period.
B) only if transactions between the parent and subsidiaries occurred during the reporting period.
C) only if material transactions between the parent and subsidiaries occurred during the reporting period.
D) only if the parent or subsidiaries show a profit from the transactions during the reporting period.

Question 8

When an entity has related parties, but does not transact business with them, there is no effect on the profit or loss or dealings of that entity.

Question 9

Casey Diesel is a publicly traded entity that manufactures diesel train engines. Each train engine requires 12 special five-gallon-bucket-sized pistons and four large carburetors. These parts are sourced from Altex Aluminum Casting. Jennifer Casey is the CEO of Casey Diesel, and her brother is a controller that has some (not significant) influence. These are not related parties.

Question 10

Henry is the CFO of Cheltenham Entity. He also sits on the board of directors for Gloucester Entity. These two are not related parties.

Question 11

Montauk Foundries casts iron bench planes. Montauk is controlled by the CEO of Woodcraft. Montauk must disclose a related party relationship with Woodcraft.

Question 12

When identifying possible related party relationships, the legal form of the relationship rather than the substance of each relationship is assessed.

Question 13

Key management personnel of an entity or of a parent of the reporting entity, or a close member of that person's family, are considered to be related parties of the entity.

Question 14

The entity should disclose the compensation of key management personnel.

Question 15

When an entity assesses if two parties are related, the entity treats a party with significant influence the same way it would treat the relationship that exists between the entity and a member of its key management personnel.

Question 16

Bali Entity (BE) gave a car that it no longer needs to its chief operating officer. He took ownership of the car as a bonus for services performed during the reporting period. Is this an event that needs to be disclosed? Why or why not?

Question 17

Alpha Entity jointly controls Bravo Entity and has significant influence over Charlie Entity. Which entities are related parties?

Question 18

Alpha Entity (AE) controls Bravo Entity (BE). BE has significant influence over Charlie Entity (CE). CE controls Delta Entity (DE). Echo Entity (EE) has significant influence over CE. Which entities are related parties?

Question 19

Parent A has a controlling interest in Subsidiary A and has significant influence over Associate A. Subsidiary A has significant influence over Associate B. Which entities are related parties?

Question 20

Mr. Zoolo has a 90% investment in Alpha Entity (AE) and is a member of the key management personnel of Bravo Entity (BE). Which entities are related parties?