Ind AS 24 requires that once a related party relationship exists — whether transactions occurred in the period or not — the relationship itself (parent, ultimate controlling party) must be disclosed. Where transactions did occur, the note must separately disclose, by category of related party, the nature of the relationship, the amount of the transactions, the amount of outstanding balances including terms and conditions and whether they are secured, any provision for doubtful debts on those balances, and expense recognised for bad or doubtful debts from related parties — none of which can be satisfied by a single aggregated number across all related parties.
What the note must break out, category by category
| Disclosure element | Testing point |
|---|---|
| Parent and ultimate controlling party name | Disclosed even where no transactions occurred in the period — a frequent omission. |
| Key management personnel compensation, split by category | Short-term employee benefits, post-employment benefits, other long-term benefits, termination benefits and share-based payment shown separately, not as one lump figure. |
| Nature of relationship and transaction amounts by category of related party | Subsidiaries, associates, joint ventures, KMP and their relatives, entities controlled by KMP each shown as separate categories, not blended. |
| Outstanding balances: terms, security, guarantees given or received | Terms of settlement and whether the balance is secured need to be stated, not just the closing balance. |
| Provisions for doubtful related party debts, and bad debt expense | Tested separately because management is often reluctant to provide against related party receivables. |
Completeness testing on the note
- 01Cross-check the related party list against board minutes and shareholding registersEvery entity identified as related for Section 2(76) Companies Act or Ind AS 24 purposes should appear somewhere in the note, even with nil transactions.
- 02Trace KMP compensation to payroll and board resolutionsThe KMP compensation figure in the note should reconcile to actual payments recorded in payroll and approved remuneration, split correctly across the five required categories.
- 03Agree transaction values to the general ledger, not management's summary scheduleA related party transaction schedule prepared by management for disclosure purposes should be recomputed from the ledger, not accepted as given.
Regulatory requirement
Ind AS 24 explicitly states that related party transactions and outstanding balances must be disclosed even if they were conducted on terms equivalent to those prevailing in arm's length transactions — pricing at market rate is never a basis to omit the disclosure.
This is practical guidance written for audit teams, not an authoritative statement of any standard or statute. Standards, forms and timelines change. Check the current text issued by the ICAI and the relevant authority before relying on anything here in an audit file.
Related resources
- Related parties & disclosuresRelated-party disclosure checklist for financial statementsA related-party note that lists transactions but not relationships, or balances but not terms, is an incomplete disclosure even if every number in it is correct.
- Related parties & disclosuresIdentifying related parties: the audit starting pointA client declaration is a starting point for the related-party list, not evidence of it. How to build and cross-check the list independently.
- Related parties & disclosuresUndisclosed related parties: red flags to test forThe counterparties that most need scrutiny are the ones nobody flagged as related. Here is what actually surfaces them.
- Related parties & disclosuresSA 550: related parties, and why the risk is completeness, not pricingThe hardest related-party risk to test for is the one that was never disclosed as a related party at all.
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