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IASB meeting summaries and observer notes

 IASB October 2007


At this meeting the Board began its redeliberation of the amendments to IAS 24 proposed in the exposure draft
State-controlled Entities and the Definition of a Related Party, published in February 2007, in the light of the comments received.

The Board discussed the project�s objective and scope, noting the limited scope of this project. The Board tentatively decided:

  • not to extend the proposed exemption to cases other than state-controlled entities.
  • not to reconsider fundamentally the definition of a related party.
  • not to include a �best endeavours clause� in IAS 24. Such a clause would state that disclosure is not required if an entity is unable to obtain the necessary information despite using its best endeavours.
  • not to include a specific materiality guideline for related party disclosures.
  • not to extend the exemption to subsidiaries (not
    state-controlled) whose parents prepare consolidated financial statements available for public use.

The Board then discussed the proposed exemption for
state-controlled entities. According to draft paragraph 17A(b) proposed in the exposure draft, the exemption would not be available for transactions with another state-controlled entity that influenced, or was influenced by, the reporting entity. The Board tentatively decided to clarify this condition as follows. The exemption 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 operating and financial policy decisions of that other entity, or that entity influenced the operating and financial policy decisions of the reporting entity.

In this context, influence is sufficient to preclude the use of the exemption. Significant influence, as defined in IAS 24, is not required.

If a transaction occurs on non-market terms (draft paragraph 17B(a)), the exemption would not be available. The remaining indicators proposed in the exposure draft (paragraphs 17(B)(b) and (c), 17C and 17D) would remain as indicators that influence might have occurred, rather than as definitive criteria that influence had occurred. The staff will consider the wording of those criteria.

When the reporting entity does not qualify for the exemption, it should disclose all transactions with the other state-controlled entity, regardless of whether those transactions are on market terms.

The exemption would be available for entities that are subject to joint control by the state, rather than being limited to cases of control or significant influence by the state.

The Board will discuss at a future meeting whether the exemption would be available if a transaction was influenced by the state, rather than by a party to the transaction.


Date: 10/19/2007