The Board continued its discussion of responses to the exposure draft of proposed Amendments to IAS 24 Related Party Disclosures� State-controlled Entities and the Definition of a Related Party. The Board tentatively confirmed its previous decisions as follows:
- The proposed exemption for state-controlled entities would not be available if either:
(a) the reporting entity influenced a transaction with that other state-controlled entity, or that entity influenced a transaction with the reporting entity; or
(b) the reporting entity influenced, ie participated in, the financial and operating policy decisions of that other entity, or that entity influenced the financial and operating policy decisions of the reporting entity.
For both (a) and (b), influence is sufficient to preclude the use of the exemption. Significant influence, as defined in IAS 24, is not required.
- If a transaction is not on arms� length terms (exposure draft, paragraph 17B(a)), the exemption for state-controlled entities would not be available. The remaining indicators proposed in the exposure draft (paragraphs 17B(b) and (c), 17C and 17D) would remain as indicators that there might have been influence, rather than as definitive criteria that influence had been exerted.
In addition, the Board tentatively decided to clarify that a transaction is on arms� length terms if the same terms, including price, would apply if it had taken place between unrelated parties.
During the discussion, some Board members and staff questioned whether the proposed approach for state-controlled entities is fully operational. The staff will research these concerns and report back to the Board. At that time, the Board will also discuss various follow up issues.