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IASB meeting summaries and observer notes

 IASB November 2007


The Board continued its discussion of responses to the exposure draft State-controlled Entities and the Definition of a Related Party.

The Board tentatively decided to retain the following features of the definition of a related party proposed in the exposure draft, and related guidance:

  • the definition of a state.
  • the definition of close members of a person�s family.
  • the term �significant voting power�.

The Board tentatively decided to make the following changes to the definition of a related party:

  • to clarify that two entities are not related to each other simply because they are both significantly influenced by the same state.
  • to clarify that the proposed exemption for state-controlled entities would not be available in cases of influence by a common state. The Board will not add guidance on how to identify a common state.
  • to include the sponsoring employer as a related party of a post-employment benefit plan. The staff will work further on the description of the sponsoring employer, paying particular attention to issues relating to multi-employer plans.

The Board will discuss at a future meeting whether two entities are related to each other:

  • when a member of the key management personnel of one entity has significant influence over the other entity.
  • when a person has joint control over one entity and significant influence (or joint control) over the other entity.
  • when the reporting entity is under the control, joint control or significant influence of a close family member of key management personnel of the other entity.

The Board also tentatively decided:

  • to retain the example of a related party transaction in paragraph 20(j) of the exposure draft�transactions or commitments to do something if a particular event occurs or does not occur in the future. The Board confirmed that this example includes executory contracts.
  • to explain in IAS 27 Consolidated and Separate Financial Statements that the term �individual financial statements� refers to financial statements that are neither consolidated nor separate financial statements, as defined in IAS 27.
  • to retain the following wording, currently in paragraph 14 of IAS 24: �The identification of related party relationships is in addition to the disclosure requirements in IAS 27, IAS 28 and IAS 31.�
  • not to give further guidance on the disclosure of key management personnel compensation.
  • not to change the categories for disclosure in paragraph 18 of IAS 24.
  • to clarify that references to an associate include the associate�s subsidiaries.
  • that the standard will be effective for periods beginning on or after 1 July 2009, with early adoption permitted.
  • that the proposed amendments to IAS 24 will apply retrospectively.
  • to amend paragraph 34 of IFRS 8 Operating Segments, so that entities would not be regarded as a single customer simply because they are controlled by the same state.
  • not to consider in this project whether business combinations between state-controlled entities should be regarded as common control transactions for IFRS 3 Business Combinations.

Date: 11/13/2007