Question 1

IAS 24:

Accepted Answer

IAS 24 deals purely with related party disclosures, including the definition of related parties and the requirements for disclosing transactions and outstanding balances with them. It does not address how such transactions should be measured or recognized, nor does it prescribe any specific format for the financial statements of entities with related parties.

Question 2

Which of the following is the related party of a reporting entity within the scope of IAS 24?

Accepted Answer

D

Question 3

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

Accepted Answer

Bonus payments are not specifically excluded from the categories of remuneration that must be disclosed for key management personnel. The other options (termination benefits, post-employment benefits, and share-based payments) are typically required disclosures under financial reporting standards for key management personnel compensation.

Question 4

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

Accepted Answer

The correct answer is B) the name of the next most senior parent entity whose financial statements are publicly available. This disclosure helps users of the financial statements understand the financial context of the reporting entity within its group structure, even if the ultimate parent's financial statements are not available.

Question 5

Jon holds an investment in Voight Limited that gives him a significant influence over the company. Jon's daughter, Angelina, also has a significant influence over another entity, Jolie Limited. What is the relationship between Voight Limited and Jolie Limited?

Accepted Answer

The answer of Jon holds an investment in Voight Limited...

Question 6

The latest version of IAS 24 is applicable for annual reporting periods commencing on or after:

Accepted Answer

The latest version of IAS 24, which deals with related party disclosures, is applicable for annual reporting periods beginning on or after 1st January 2011.

Question 7

John Berry is one of the non-executive directors of Monash Company. In this current financial year, Monash Company had transactions with the following entities:
I. Borrowed money from ABC Bank.
II. Purchased raw materials from Deakin Company.
III. Loaned money to one of its subsidiaries, Swinburne Company, with 10% per annum.
IV. Sold products to Melbourne Company, of which John Berry is also a director.
Which transactions are not related party transactions between Monash Company and another entity?

Accepted Answer

The answer of John Berry is one of the non-executive...

Question 8

Maria is one of the directors in Leo Limited, which is one the subsidiaries of Aries Limited. She also has a joint control with Mimi in Virgo Limited. In this circumstance, the followings are related parties to Leo Limited, except for:

Accepted Answer

Mimi is not a related party to Leo Limited because she does not have a direct relationship with Leo Limited; her connection is through Virgo Limited, which is not a subsidiary or parent of Leo Limited.

Question 9

Disclosure of related parties is essential in financial reporting because:

Accepted Answer

Related parties have the potential to affect an entity's profit or loss and financial position that might not otherwise occur. It is important to disclose related party transactions to provide transparency and avoid potential conflicts of interest.

Answer: B (but less correct than C)
 While there are certain limits imposed on entities in regards to how many related party transactions they could have, this is not the main reason why disclosure of related parties is essential in financial reporting.

Answer: A and D are incorrect
 Related parties cannot be trusted is not a valid reason why disclosure of related parties is essential in financial reporting. Additionally, while some corporate collapses may be caused by related party transactions, this is not the primary reason why disclosure of related parties is essential in financial reporting.

Question 10

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

Accepted Answer

An entity in which an investor has significant influence is known as an associate. To be classified as an associate, the investor must have significant influence over the entity, but not control over its operations. Significant Influence is defined as the power to participate in the financial and operating policy decisions of the investee but not control over those policies. Joint venture, subsidiary, and related party all have different ownership and control criteria.

Question 11

Two entities are not regarded as related parties simply because:

Accepted Answer

The answer of Two entities are not regarded as related...

Question 12

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

Accepted Answer

Significant influence refers to the power to participate in the financial and operating policy decisions of an entity, but not control those policies. It is often associated with ownership of a significant but not majority share of voting power in another entity. Control, on the other hand, implies the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities, which goes beyond mere participation. Share ownership does not necessarily grant the power to participate in decision-making unless it conveys significant influence or control. Joint control is shared among a few entities and involves the contractually agreed sharing of control, which is distinct from the unilateral power to participate in decision-making.

Question 13

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

Accepted Answer

The answer of An entity is related to a reporting...

Question 14

Aladdin is the owner and founder of Genie Limited. Aladdin's wife, Jasmine, has a controlling investment in Jafar Limited. Which of the followings describes the relationship between Genie Limited and Jafar Limited?

Accepted Answer

Jasmine's controlling investment in Jafar Limited creates a related party relationship between Jafar Limited and any company in which Aladdin has a significant ownership or control, such as Genie Limited. Therefore, Genie Limited is a related party of Jafar Limited and disclosure about transactions with Jafar Limited would be required in the financial statements of Genie Limited. Option A is incorrect because the two companies are related parties due to the relationship between the owners. Option B is incorrect because disclosure is required. Option D is incorrect because there is no indication that Genie Limited has control over Jafar Limited.

Question 15

The scope of IAS 24 states that IAS 24 shall be applied in identifying the followings, except for:

Accepted Answer

IAS 24 does not specifically address insider trading with related parties, but rather focuses on identifying related party relationships and transactions, outstanding balances and commitments between entities and their related parties, and circumstances in which disclosures of transactions with related parties are required.

Question 16

Galaxy Limited is a listed company operating in retail industry with three business units: Milky Way, Andromeda, and Whirlpool. Which of the followings is likely to be the key management personnel of Galaxy Limited?

Accepted Answer

The key management personnel of Galaxy Limited would likely be the heads of its business units, such as the general manager of Milky Way. The managing director's personal assistant, the company's auditor, and the company's IT manager are important roles in the company but do not hold key management positions.

Question 17

A government entity controls both Edward Limited and Jacob Limited. Bella Limited and Jasper Limited are the subsidiaries of Edward Limited. Carlisle Cullen is the managing director of Edward Limited. Edward Limited can apply the partial exemption of disclosures in paragraph 25 of IAS 24 to transactions with the following parties, except for:

Accepted Answer

According to paragraph 25 of IAS 24, partial exemption of disclosures can be applied to transactions with subsidiaries and the government entity. However, it cannot be applied to transactions with key management personnel, such as Carlisle Cullen, who is the managing director of Edward Limited. Therefore, the best choice is A.

Question 18

Examples of related party transactions that must be disclosed include:

Accepted Answer

All of the above transactions involve a potential conflict of interest or lack of arm's length negotiation between related parties, and as such must be disclosed in financial statements to provide transparency and prevent potential fraud or misrepresentation.

Question 19

Willow Limited and Rupert Limited are the two subsidiaries of Buffy Company. Dan Sanders, one of the directors of Buffy Company, is also a director of Rupert Limited. Dan's wife, Sandra, has 10% of shareholding in Rupert Limited. Which of the followings are related parties to Willow Limited?

Accepted Answer

Willow Limited is a subsidiary of Buffy Company, so Buffy Company is a related party. Rupert Limited is also a subsidiary of Buffy Company, so it is a related party as well. Dan Sanders is a director of both Buffy Company and Rupert Limited, but this alone does not make him a related party to Willow Limited. Sandra Sanders' shareholding in Rupert Limited also does not make her a related party to Willow Limited. Therefore, the only answer is B, which includes the two subsidiaries of Buffy Company.

Question 20

According to IAS 24, related party disclosures are required irrespective of whether there have been related party transactions when:

Accepted Answer

The answer of According to IAS 24, related party disclosures...

Quiz 22: Operating Segments