8/2/2019 BAL SIR

1/21

GOOD MORNING

8/2/2019 BAL SIR

2/21

ACCOUNTING STANDARD 18RELATED PARTY

DISCLOSURES

PRESENTED BYRASMITA MISHRA

NUPUR SAMANTARAY

8/2/2019 BAL SIR

3/21

RELATED PARTY

A related party is essentially anyparty that controls or cansignificantly influence the

management or operating policiesof the company during the

reporting period

8/2/2019 BAL SIR

4/21

AS-18, deals only with the

following related party

relationship

Enterprises that directly, or indirectly through

one or more intermediaries, control or

controlled by, or are under common controlwith the reporting enterprise

Associates and joint ventures of the reporting

enterprise and the investing party or venturein respect of which the reporting enterprise isan associate or a joint venture

8/2/2019 BAL SIR

5/21

Contd..

Individuals owing an interest in the votingpower of the reporting enterprise that givesthem control or significant influence overthe enterprise and relatives of any suchindividual.

Directors or major shareholders of the

reporting enterprise

8/2/2019 BAL SIR

6/21

EXAMPLE

IDENTIFY THE RELATEDPARTIES

X limited holds 51% of Y limited

Y limited holds 51% of z limited

O limited holds 49% of z limited

8/2/2019 BAL SIR

7/21

WHAT SHOULD BE DISCLOSED

Related party relationship

Transactions between a

reporting enterprise and its

related parties

8/2/2019 BAL SIR

8/21

Classifications of Related

Parties

On the basis of control concept

i) control by ownership

ii) control over composition of

board

iii) control of substantial interestin the voting power

8/2/2019 BAL SIR

9/21

Contd..

On the basis of significant influence

i) by representation of the board of

directorsii) participation in policy making process

iii) material inter- company transactions

iv) inter-change of managerialpersonnel

v) dependence on technical information

8/2/2019 BAL SIR

10/21

Exception of related party

Two companies simply because they have a directorin common,A single customer, supplier, franchiser, distributor,or general agent with whom an enterprise transacts

a significant volume of business Providers of finance; Trade unions; Public utilities;Government departments and governmentagencies including Government sponsored bodies.

8/2/2019 BAL SIR

11/21

such disclosures would conflict with thereporting enterprises duties of confidentialityas specifically required in terms of a statuteor by any regulator

In case a statute or a regulator or a similarcompetent authority governing an enterpriseprohibit the enterprise to disclose certaininformation

No disclosure is required in consolidatedfinancial statements in respect of intra-grouptransactions.

8/2/2019 BAL SIR

12/21

Disclosure of transactions between membersof a group is unnecessary in consolidatedfinancial statements

No disclosure is required in the financialstatements of state controlled enterprises asregards related party relationships with otherstate-controlled enterprises and transactionswith such enterprises.

8/2/2019 BAL SIR

13/21

Purpose of disclosure

A related party relationship could have an effect onthe profit or loss and financial position of an entity. The profit or loss and financial position of an entitymay be affected by a related party relationship evenif related party transactions do not occur. Related party relationships are a normal feature ofcommerce and business.

8/2/2019 BAL SIR

14/21

AS 18 VS IFRS/IAS 24

Basis of distinction are:MeaningState controlled ethicsPricing policies

8/2/2019 BAL SIR

15/21

CASE STUDY

SATYAM SAGA

8/2/2019 BAL SIR

16/21

Details Proposal to acquire Maytas Infra and Maytas Properties

at $1.6 bn Share holding patternSatyam Promoters -8.74%

Public -71.80%FII - 48.2%Others -19.46%Maytas Promoters 36.64%Public - 63.36%

FII - 4.88%

8/2/2019 BAL SIR

17/21

Why shareholder protest?? Investment amount Raju sons as Promoters of Maytas Deal not approved by shareholders Over valuation of Maytas 4 independent directors resigned Disclosure of facts by Raju

8/2/2019 BAL SIR

18/21

Facts disclosed

Inflated cash and bank balanceUnderstated liabilitiesOverstated debtor positionOverstated profit position

8/2/2019 BAL SIR

19/21

Reason for the Deal

Fill the gap of fictitious assets withreal one

Benefits at the end of Maytas Infraand Properties

8/2/2019 BAL SIR

20/21

To be trusted is a greater complimentthan being loved &Trust is like a vase ,once it breaksthough you can fix it but the vase willnever be same again

8/2/2019 BAL SIR

21/21

THANK YOU&HAVE A NICE DAY