AASB 124 - Related Party Disclosures - July 2015

The Standard centres on a small set of interlocking legal-accounting definitions and disclosure principles. Understanding them is key to applying the mechanics above.

Related party and related party transaction

• A related party is defined as a person or entity related to the reporting entity (para 9). The definition splits into persons and entities. A person or a close member of that person’s family is related if that person (i) has control or joint control of the reporting entity; (ii) has significant influence; or (iii) is a member of key management personnel (para 9(a)(i)-(iii)). An entity is related where it is in the same group, is an associate or joint venture, is a post-employment benefit plan for the reporting entity’s employees, is controlled or jointly controlled by a person identified in (a), or where other cross-relationships of influence exist (para 9(b)(i)-(viii)).
• A related party transaction is any transfer of resources, services or obligations between a reporting entity and a related party, regardless of whether a price is charged (para 9, definitions).

Key management personnel (KMP) and compensation

• KMP are persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including directors (para 9). The compensation definition is broad and follows AASB 119, covering short-term benefits, post-employment benefits, other long-term benefits, termination benefits and share-based payments (para 9, “Compensation”).
• The Standard requires disclosure of total KMP compensation and broken down by the five specified categories (para 17). Where KMP services are provided by another entity (a management entity), the receiving entity need not apply paragraph 17 to amounts paid by the management entity to its employees and directors; instead the receiving entity discloses amounts incurred for the provision of KMP services (paras 17A, 18A; IG7-IG8).

Government-related entities and partial exemption

• Government-related entity is an entity that is controlled, jointly controlled or significantly influenced by a government (para 9).
• Government-related entities have a limited exemption from paragraph 18 disclosures for transactions and outstanding balances with the government that controls or significantly influences the reporting entity and with other entities related by the same government (para 25). If the exemption is used, alternative disclosures are required: the name of the government and the nature of the relationship; sufficient detail about individually significant transactions; and for collectively significant but individually immaterial transactions, a qualitative or quantitative indication of extent (para 26). Entities must use judgement and consider the factors listed in paragraph 27 in determining the level of disclosure.

Materiality, substance over legal form and aggregation

• The Standard directs attention to substance of relationships not merely legal form (para 10).
• It acknowledges the role of materiality in selecting disclosures and permits aggregation of similar items unless separate disclosure is necessary for understanding the effects on the financial statements (para 24). The implementation guidance reiterates that not-for-profit public sector entities need to apply materiality judgement and need not disclose immaterial transactions that occur on terms no different to those applying to the general public (IG11; BC17).

Cross-references and alignment

• Control, joint control and significant influence are defined by other Standards (AASB 10, AASB 11, AASB 128) and are imported by reference into AASB 124 (para 9).
• Tiering and differential requirements appear in AASB 1053 and AASB 1060: Tier 2 entities applying AASB 1060 may use simplified disclosures and so are not subject to the full Standard (AusB1; compilation table).
• The Standard aligns with IAS 24 for for-profit Tier 1 entities; Australian-specific paragraphs are identified with the prefix “Aus” (Comparison with IAS 24).

Implementation guidance and illustrative examples

• The AASB provided Implementation Guidance tailored to not-for-profit public sector entities to address where a for-profit perspective does not translate directly to public sector circumstances, and illustrative examples accompany the Standard to show application including the partial exemption for government-related entities and KMP scenarios (IG1-IG2; illustrative examples).

Ancillary definitions and Australian specifics

• Close members of the family are defined by reference to expected influence in dealings with the entity: children, spouse or domestic partner, children of spouse, and dependants (para 9).
• The Appendix A Australian definitions add that “Director” includes persons appointed to governing bodies under other names and confirms that “remuneration” is treated as “compensation” in this Standard (Aus9.1; Aus9.1.1).

Those core concepts, as expressed by the numbered paragraphs and implementation guidance, are the operational vocabulary preparers, auditors and regulators use to determine what must be captured in the financial reporting systems and disclosed in notes.

AASB 124’s coverage is broad and heterogeneous. The Standard applies to entities preparing general purpose financial statements, and specifies particular applications to consolidated, separate and individual financial statements (para 3). Who must apply which parts is modulated by entity type, tier and whether the entity is government‑related.

All entities preparing general purpose financial statements

• The Standard is applied in identifying related party relationships, transactions and outstanding balances, and in determining required disclosures for those items (para 2). It therefore reaches any reporting entity preparing financial statements in accordance with applicable Australian Accounting Standards where those standards are required by statute or regulation to be followed.

Parents, investors and consolidated entities

• Parents and investors with joint control of or significant influence over an investee must apply the Standard to disclosures in their consolidated or separate financial statements presented under AASB 10 or AASB 127 (para 3). Relationships between a parent and its subsidiaries must be disclosed irrespective of whether transactions occurred (para 13).

Not-for-profit public sector entities

• The AASB extended AASB 124 to not-for-profit public sector entities by amendments (AASB 2015-6) and included Australian implementation guidance to assist public sector application (Aus28.2; IG1-IG2). The Standard applies to public sector entities, but the guidance emphasises that the guidance applies only to public sector entities and not to private sector entities (Australian implementation guidance header).

Government-related entities

• Government-related entities are within scope but may use the partial exemption for disclosures required by paragraph 18 in relation to transactions and outstanding balances with their controlling government and other entities related by the same government (para 25). Where entities use that exemption, they must make alternative disclosures described in paragraph 26 and apply judgement per paragraph 27 and IG13-IG14.

Entities in different tiers

• The Standard recognises the two-tier reporting structure. Tier 2 entities applying AASB 1060 (simplified disclosures for for-profit and not-for-profit Tier 2 entities) are not subject to parts of this Standard when preparing general purpose financial statements under AASB 1060 (AusB1; compilation table entries). The compilation table and table of standards show amendments and effective dates impacting Tier application (Compilation details).

Specific roles and persons

• Individuals who may be KMP, including directors and those with authority for planning, directing and controlling the entity, are affected because the Standard requires KMP compensation disclosures and treatment of KMP-related transactions (para 9; para 17). The Implementation Guidance outlines that ministers, councillors or senior public servants may or may not be KMP depending on factual authority and legislative instruments; several examples illustrate public sector cases (IG3-IG6; Examples 1-6).

Entities with overseas parents

• Entities whose parent or ultimate controller is incorporated or constituted outside Australia must identify which named parents are incorporated overseas and disclose the name of the ultimate controlling entity incorporated within Australia (Aus13.1).

Investment entities and consolidation exceptions

• The Standard instructs that intragroup related party transactions and balances are eliminated in consolidated financial statements, except for transactions between an investment entity and subsidiaries measured at fair value through profit or loss (para 4).

Effective date and transitional treatment

• The compiled Standard applies to annual periods beginning on or after 1 January 2023; earlier application is permitted in certain windows (Compilation details). Specific amendments have earlier effective dates, for example Aus28.1 required application for annual periods beginning on or after 1 July 2016 with earlier application permitted back to 1 January 2014 in earlier text; users must check transitional provisions relevant to their filing periods (Aus28.1; Aus28.2; compilation table).

Who ultimately decides

• Preparers (management) decide how to identify related parties and determine KMP based on substance (para 10; IG3-IG6); auditors and regulators then assess compliance. The Standard does not itself prescribe administrative penalties; it is an Accounting Standard made under s 334 of the Corporations Act and it becomes part of the set of Australian Accounting Standards entities are required to follow where that statutory framework applies (Accounting Standard AASB 124 made under section 334).

In short, the Standard affects a wide class of reporting entities and specific individuals within those entities; it has targeted provisions for public sector entities and for entities within the tiered reporting structure, and it changes disclosure obligations particularly for not-for-profit public sector entities that previously enjoyed an exemption.

AASB 124 places precise disclosure duties on reporting entities and affords limited carve-outs and conditional rights to use exemptions; it also provides procedural guidance about how to exercise judgement. The core duties and the rights to limited relief are set out below with paragraph citations.

Duties to disclose relationships and hierarchy

• An entity must disclose relationships between a parent and its subsidiaries irrespective of transactions between them, name its parent and, if different, the ultimate controlling party; if neither produced consolidated financial statements available for public use, the entity must disclose the next most senior parent that does so (para 13). Australian-specific Aus13.1 requires disclosure of which parents or ultimate controllers are incorporated overseas and the name of the ultimate controlling entity incorporated within Australia.

Duties regarding key management personnel

• Entities must disclose KMP compensation in total and by category: short-term benefits, post-employment benefits, other long-term benefits, termination benefits and share-based payment (para 17). If KMP services are supplied by a separate management entity, the entity need not apply paragraph 17 to compensation that the management entity pays to its employees or directors; instead it must disclose amounts incurred for provision of KMP services (paras 17A, 18A; IG7-IG8).

Duties regarding related party transactions and balances

• Where related party transactions occurred during the periods covered by the financial statements, the entity shall disclose the nature of the related party relationship and information necessary to understand the potential effect of the relationship on the financial statements. Minimum disclosures include the amount of transactions; amounts of outstanding balances including commitments and their terms and nature of consideration in settlement; details of guarantees given or received; provisions for doubtful debts related to outstanding balances; and the expense recognised in the period for bad or doubtful debts due from related parties (para 18).

Categorisation and presentation duties

• Disclosures required by paragraph 18 must be made separately for specified categories: parent; entities with joint control or significant influence; subsidiaries; associates; joint ventures where the entity is a joint venturer; KMP of the entity or its parent; and other related parties (para 19). The Standard indicates that this classification is an extension of AASB 101’s requirements and that amounts payable to and receivable from related parties should be presented either in the statement of financial position or in the notes (para 20).

Duties about claims and substantiation

• Claims that related party transactions were on arm’s length terms are allowed only if such terms can be substantiated (para 23). This creates a record-keeping and evidentiary duty where entities wish to assert market-equivalence.

Duties and rights for government-related entities

• Government-related entities are exempt from paragraph 18 disclosures in relation to transactions and outstanding balances with: (a) the government that controls or significantly influences the entity; and (b) other entities related because the same government has control or influence (para 25). If the entity applies this exemption, it must disclose the name of the government and the nature of its relationship, and (b)(i) individually significant transactions; and (b)(ii) for other transactions that are collectively significant but not individually significant, a qualitative or quantitative indication of their extent (para 26). The Standard requires the entity to use judgement and consider closeness of relationship and factors in paragraph 27 to determine detail (para 27).

Aggregation and materiality rights

• Items of a similar nature may be disclosed in aggregate except when separate disclosure is necessary for an understanding of the effects of related party transactions on the financial statements (para 24). More generally, materiality considerations under AASB 101 and AASB 108 apply and are referenced in the implementation guidance for public sector entities (IG11; BC17).

Procedural and interpretative guidance

• The Standard emphasises substance over legal form when considering related party relationships (para 10). The Implementation Guidance for not-for-profit public sector entities provides sector‑specific guidance on KMP identification, ministerial roles and materiality judgement, and illustrative examples to operationalise the Standard in public sector contexts (IG3-IG6; IG9-IG14; examples).

Rights to limited exclusions

• Tier 2 entities applying AASB 1060 may use simplified disclosures and thereby are not subject to the full Standard in preparing general purpose financial statements under AASB 1060 (AusB1). The management entity carve-out to paragraph 17 is a limited right to avoid double-counting or impractical attribution where KMP are remunerated via a central agency (paras 17A, 18A).

Interaction with other disclosure duties

• The parent-subsidiary disclosure duty is additional to disclosure requirements in AASB 127 and AASB 12 (para 15), so entities must coordinate related party disclosures with other reporting duties.

Enforcement and statutory grounding

• The Standard was made under section 334 of the Corporations Act 2001, and the compilation notes that once the Standard applies under that section it supersedes the previous AASB 124 (Accounting Standard AASB 124 made under s 334; Aus29.2). The Standard itself does not set out penalties; duties flow into the wider regulatory framework of accounting standards compliance and audit.

In sum, preparers must disclose specified categories of information about relationships, transactions and balances, substantiate arm’s length assertions, apply materiality and substance-over-form principles, and, for government-related entities, either use the exemption with alternative disclosure or provide the full paragraph 18 disclosures. The Standard provides specific, bounded rights to simplified disclosure for Tier 2 and to avoid duplicative KMP disclosure where services are provided by a management entity.

AASB 124 is an Accounting Standard; it sets disclosure requirements rather than direct criminal or civil penalties within its text. The Standard itself does not specify sanctions, fines or criminal offences. It was made by the AASB under section 334 of the Corporations Act 2001, and therefore becomes part of the statutory framework of Australian Accounting Standards for entities to which that Act applies (Accounting Standard AASB 124: "made … under section 334" paragraph; Aus29.2). Consequences for non‑compliance typically arise through the broader regulatory and assurance ecosystem rather than from the Standard text.

Mechanisms outside the Standard that commonly enforce compliance

• Statutory obligations and regulator oversight: Where entities are required by law to prepare financial statements in conformity with Australian Accounting Standards, regulators such as the Australian Securities and Investments Commission (ASIC) may take supervisory or enforcement action for non‑compliance with statutory reporting duties; the Standard itself is made under the Corporations Act but does not itself list enforcement steps (Accounting Standard AASB 124 made under section 334; compilation notes).
• Audit and assurance: Independent auditors test compliance with applicable Australian Accounting Standards when auditing general purpose financial statements. The Standard’s disclosure requirements are subject to audit procedures and auditor reporting obligations; failure to disclose required related party information will typically be raised in audit reports or management letters.
• Market and contractual consequences: For entities with public stakeholders, omitted or misleading disclosures can lead to investor challenge, shareholder action, covenant breaches or reputational consequences. The Standard references disclosure obligations in other Standards and legislation (eg AASB 101, AASB 108, AASB 120) which may themselves trigger compliance assessments.
• Regulatory cross-reporting: The Implementation Guidance notes that certain transactions may already be disclosed to regulatory or supervisory authorities and that entities should consider such reporting in determining the extent of their AASB 124 disclosures (para 27; IG11). Where other Acts or statutory instruments require disclosure of particular relationships or ministerial interests, those regimes may impose their own compliance frameworks.

Limits in the instrument

• AASB 124 does not itself create criminal penalties or administrative fines; it prescribes the content of financial reporting. The text does not specify the sanctions available for breach (no paragraph in the Standard enumerates penalties). Any penal consequences depend on the statutory or regulatory framework under which the financial statements are prepared and lodged.

Implication for preparers and advisers

• Entities should assume that non‑compliance will be detectable by auditors and, for public companies or regulated entities, by regulators and stakeholders. The Standard places evidentiary duties on entities where they wish to assert that transactions were on arm’s length terms (para 23). The requirement to disclose names of parents and ultimate controlling parties (para 13; Aus13.1) and detailed transaction terms (para 18) creates concrete audit trails and records that auditors and regulators will examine.

In short, AASB 124 is enforced indirectly through the statutory obligation to prepare financial statements in conformity with Australian Accounting Standards and through normal audit and regulatory mechanisms. The Standard itself does not set out instruments of penal enforcement within its text; the relevant enforcement pathways are in the Corporations Act, auditing standards and regulator powers outside the Standard.

AASB 124 does not stand alone; it is explicitly cross‑referenced to other accounting Standards and interacts with statutory regimes relevant to financial reporting. The Standard’s text and implementation guidance identify these interactions and limits.

Cross-references to accounting Standards

• Control, joint control and significant influence are defined by AASB 10, AASB 11 and AASB 128 respectively; those concepts are used in AASB 124 with the meanings specified in those Standards (para 9). This means an entity’s related party analysis depends on conclusions reached under consolidation and joint arrangement Standards.
• The parent/subsidiary disclosures required by para 13 are additional to disclosure obligations in AASB 127 and AASB 12; entities must reconcile AASB 124’s parent‑subsidiary naming requirements with those Standards (para 15).
• The concept of compensation draws on AASB 119 Employee Benefits and AASB 2 Share-based Payment (para 9). Accordingly, classification and measurement of KMP compensation items follow those Standards.
• The Standard references AASB 101 Presentation of Financial Statements, AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors and AASB 1057 Application of Australian Accounting Standards for application context and materiality guidance (opening paragraphs and para 24).

Interaction with IASB and international standards

• For-profit Tier 1 entities that comply with AASB 124 also comply with IAS 24 because the Standard incorporates IAS 24 as issued and amended by the IASB; Australian-specific paragraphs are identified with “Aus” where applicable (Comparison with IAS 24). The AASB has signalled that not-for-profit entities’ compliance with IAS 24 depends on whether Aus paragraphs provide additional guidance or inconsistent requirements.

Corporations Act and legislative status

• AASB 124 was made under section 334 of the Corporations Act 2001 (Accounting Standard AASB 124), which is the machinery by which Australian Accounting Standards gain statutory effect for entities within the Corporations Act regime. The compilation notes the Standard’s commencement under that statutory route and that the repealed Standard continues to apply to periods before it came into force as if repeal had not occurred (Aus29.2).

Overlap with sectoral statutory reporting and public registers

• The Implementation Guidance notes that some related party information may already be disclosed in statutory registers or other legislative instruments and that those disclosures are relevant to materiality assessments and the extent of AASB 124 disclosures (para 27; IG11). For example, ministerial registers of interests and parliamentary reporting may overlap with KMP disclosure issues.

Interaction with other accounting topics

• Transactions that may constitute government assistance must be considered against AASB 120 Accounting for Government Grants and Disclosure of Government Assistance, which the Standard explicitly references in Illustrative Examples (IE3) and in the Basis for Conclusions (BC17; illustrative note cross-reference).
• Provisions for doubtful debts and contingent liabilities are relevant to related party outstanding balances and are cross‑referenced to AASB 137 in a footnote in the Standard (para 21(i) footnote).

Tiering and reduced disclosure regime

• AASB 1053 and AASB 1060 establish the two-tier reporting structure and simplified disclosures for Tier 2 entities. Appendix B and AusB1 confirm that entities applying AASB 1060 are not subject to the full Standard and may use Australian simplified disclosures (AusB1; compilation table entries for AASB 1060).

Public sector legal frameworks

• Implementation Guidance addresses how public sector legislative instruments and ministerial powers affect KMP identification and related party status. For example, whether a Minister is KMP of an entity depends on the facts and legislative powers in the enabling Act for an entity (IG3-IG6). The guidance recognises that public sector reporting may overlap with general government sector reporting under AASB 1049, and the Basis for Conclusions discusses applicability to general government sector financial statements (BC23-BC24).

Practical coordination for preparers

• Entities must coordinate related party disclosures under AASB 124 with other disclosure obligations arising from statute, regulation and other accounting Standards, and must apply judgement when transactions are also reported elsewhere. The text instructs entities to consider other reporting to regulatory or supervisory authorities when assessing disclosure significance (para 27).

In summary, AASB 124 is embedded in the broader Australian accounting and legal framework: it imports definitions from consolidation Standards, aligns with IAS 24 for Tier 1 for‑profit entities, sits within the Corporations Act reporting framework, interacts with government assistance and provisions Standards, and must be applied in light of sectoral statutes and other disclosure regimes.

AASB 124 has been through multiple amendments and the compiled Standard presented here incorporates amendments up to 15 December 2022. The compilation details and the Basis for Conclusions explain key amendment milestones and their practical effects.

Principal re-issuance and extension to public sector

• The Accounting Standard AASB 124 Related Party Disclosures was made by the AASB on 24 July 2015 under section 334 of the Corporations Act (Accounting Standard AASB 124 Related Party Disclosures, paragraph). The AASB subsequently issued amendments extending the scope of AASB 124 to not-for-profit public sector entities, notably AASB 2015-6 (see Aus28.2 and the Basis for Conclusions on AASB 2015-6).

Compilation table and later amendments

• The Compilation Details list the following Standards and effective dates incorporated into the compiled AASB 124:
  • AASB 124 (24 Jul 2015), commencement 30 Jun 2016, effective for annual periods beginning 1 Jul 2016 (compilation table item (a));
  • AASB 2019-1 (21 May 2019), effective 1 Jan 2020 (compilation table item (b));
  • AASB 1060 (6 Mar 2020), effective 1 Jul 2021 (compilation table item (c));
  • AASB 2022-7 (15 Dec 2022), effective 1 Jan 2023 (compilation table item (d)). The compilation notes additional application, saving or transitional provisions tied to each amending Standard.

Table of amendments

• The table of amendments in the compilation identifies particular paragraph changes: AusCF1 added by AASB 2019-1; paragraph 11 amended by AASB 2022-7; Aus29.1 repealed by the Legislation Act 2003 s 48D; Appendix B replaced by AASB 1060. The compilation also records that the compiled version takes into account amendments up to and including 15 December 2022.

Key textual additions and deletions

• Australian-specific paragraphs (prefix “Aus”) were added to address application to not-for-profit public sector entities and to define Australian meanings such as “Director” in Appendix A (Aus9.1; Aus9.1.1).
• Paragraphs 17A and 18A were added by AASB 2014-1 (June 2014) to provide disclosure treatment where KMP services are provided by a management entity; the compilation records that this amendment amended paragraph 9 and added paragraphs 17A and 18A, with application for periods beginning on or after 1 July 2014 (Aus28.2; 28C).
• AASB 2015-6 specifically amended the Standard to extend related party disclosures to not-for-profit public sector entities and added Implementation Guidance to assist public sector application (Aus28.2; Basis for Conclusions BC1-BC7).

Basis for Conclusions and rationale for extending scope

• The Basis for Conclusions attached to AASB 2015-6 explains the AASB’s considerations in deciding to require not-for-profit public sector entities to apply AASB 124. The Board considered practicability, the public interest in disclosure about KMP and related party transactions, alignment with IASB amendments that simplified the related party definition and provided a government-related partial exemption, and the need to provide implementation guidance to help public sector entities apply the Standard (BC1-BC7; BC8-BC32). The Board decided not to amend the definition of KMP but to add guidance on ministerial roles and materiality judgement, and not to require additional compensation disclosures beyond those in the Standard for for-profit entities (BC8-BC29).

Transition and effective date history

• Earlier versions of the Standard required retrospective application for periods beginning on or after 1 January 2011, but later amendments to consolidation and joint arrangement Standards led to additional transition notes in the deleted IAS 24 text. The compiled Standard now applies to annual periods beginning on or after 1 January 2023 as a compilation; however, specific amendments have their own effective dates and earlier application windows (Compilation details; Aus28.1; Aus28.2; 28C). Users must refer to the table of Standards and applicable transitional provisions to determine which version and which amendments apply to their reporting period.

Repeals and supersessions

• Aus29.2 states the Standard repeals the previous AASB 124 issued in December 2009 but preserves the application of the earlier version to periods ending before the new Standard started to apply under section 334 of the Corporations Act (Aus29.2). Deleted IAS 24 text is included in the compilation as historical reference but is not part of the current Standard.

In sum, the amendment history shows a trajectory from a for-profit oriented IAS 24 adoption to a broader Australian Standard that explicitly incorporates public sector guidance, management entity carve-outs and tiered reporting adjustments. The compilation table provides the authoritative list of amending instruments and their effective dates; preparers must map those to their reporting cycles to determine applicability.

The compiled AASB 124 text, including its Australian implementation guidance and Basis for Conclusions, does not record any litigation, judicial interpretations or case law. The Standard contains illustrative examples, implementation guidance and a Basis for Conclusions but does not cite or rely upon judicial decisions. The text itself notes which paragraphs are Australian-specific and which items have equal authoritative status (opening paragraphs), but it does not reference court decisions.

What the instrument records

• The Standard’s text and accompanying material are normative and explanatory, and the Basis for Conclusions documents the AASB’s deliberations and reasons for amendments such as extending coverage to not-for-profit public sector entities. The document does not list or describe litigation history or regulatory enforcement cases.

Implications for practitioners

• Because the Standard provides concepts that involve significant judgement (eg identification of KMP, assessment of related party status, application of the government‑related exemption and materiality judgements), practical disputes may arise in audit or regulatory contexts about the adequacy or sufficiency of disclosures. Any litigation or regulatory enforcement would arise under other legal instruments and be based on alleged non-compliance with reporting duties or misleading statements in financial reports rather than based on AASB 124 creating standalone causes of action.
• Given the absence of litigation references in the Standard, practitioners must rely on authoritative accounting literature, audit guidance and regulator commentaries, and monitor case law emerging from courts, regulatory bodies or tribunal decisions outside the text of AASB 124 for precedential guidance.

If a reader requires a catalogue of post-issue litigation or regulatory enforcement decisions that implicate AASB 124 disclosures, that material sits outside the Standard and must be researched in ASIC decisions, court judgments and professional disciplinary proceedings; it is not contained in the compiled Standard provided.

AASB 124 contains numerous technical traps and judgement points that commonly cause errors or inconsistent disclosures if not managed deliberately. The Standard and its guidance highlight areas where preparers should be particularly cautious.

Misidentifying related parties by focusing on legal form

• The Standard directs attention to the substance of relationships not merely legal form (para 10). Preparers who mechanically apply organisational charts without assessing substance may misclassify relationships. Examples in the Implementation Guidance illustrate ministerial and government scenarios where apparent legal form does not automatically translate into KMP or related party status (IG3-IG6).

Ministers and public officeholders may or may not be KMP

• The Implementation Guidance emphasises that a Minister is not automatically KMP of every entity in the Minister’s portfolio; KMP status depends on the authority and responsibility to plan, direct and control the entity (IG3-IG6; examples 1-6). The guidance provides layered examples where Ministers are and are not KMP; failure to apply the guidance can either over‑report or under‑report KMP relationships.

Government-related entity exemption does not cover persons

• The partial exemption in paragraph 25 exempts transactions with the government and other entities tied by the same government. It does not exempt disclosures about transactions with persons who are related parties, such as Ministers, councillors or KMP (paras 25-27; BC14-BC17; IG10). A common mistake is to assume that government control means no related party disclosures are required concerning persons connected with the government; the Standard requires separate consideration.

Arm’s length assertions must be substantiated

• Paragraph 23 permits assertions that transactions were on terms equivalent to arm’s length only if such terms can be substantiated. The implication is an evidentiary burden; preparers should keep contemporaneous documentation proving pricing, comparable transactions or independent valuations.

Aggregation can conceal individually significant items

• The Standard allows aggregation of similar items (para 24) but requires separate disclosure where necessary for understanding. Practitioners must identify individually significant transactions that would be obscured by aggregation and disclose them separately. The government-related entity exemption’s alternative disclosure regime singles out individually significant transactions (para 26(b)(i)).

Management entity carve-out and disclosure timing

• Where KMP services are provided by a separate management entity, paragraphs 17A and 18A create a limited relief and require disclosure of amounts incurred for such services. Misunderstanding the carve-out may lead to double counting or omission of KMP compensation in the reporting entity’s financial statements. The IG clarifies reimbursement obligations and when disclosure is required (IG7-IG8).

Consolidation elimination exceptions

• The Standard instructs that intragroup related party transactions and outstanding balances are eliminated in consolidated financial statements except for transactions between an investment entity and its subsidiaries measured at fair value through profit or loss (para 4). Failure to apply that exception correctly can result in inconsistent consolidated disclosures.

Tier 2 and simplified disclosures

• Appendix B and AusB1 exclude entities applying AASB 1060 from full Standard requirements. Entities moving between tiers must be careful to apply the correct disclosure set and ensure that transitional disclosures and comparatives are treated consistently (AusB1; compilation table).

Materiality judgement and cost-benefit

• Implementation Guidance stresses materiality and the cost‑benefit trade-off in gathering and disclosing related party data, especially in the public sector where many interactions with related parties may occur on general public terms (IG11; BC17). Preparers must document materiality judgements and the rationale for not disclosing immaterial related party transactions.

Parent and ultimate controlling party naming nuances

• Paragraph 13 requires naming of parent and ultimate controlling party; Aus13.1 requires identification of overseas-incorporated parents and naming of an ultimate controlling entity incorporated in Australia, if any. This can be operationally tricky for complex international group structures and requires legal entity analysis and consistent public‑use consolidation verification.

Evidence for guarantees, terms and commitments

• Paragraph 18 requires disclosure of the terms and conditions of outstanding balances, including whether secured, and details of guarantees given or received. Practitioners must capture contractual terms, security arrangements and contingent obligations related to related party balances and ensure that such ancillary documents are available for disclosure and audit.

Overlap with other statutory reporting

• The Standard references reporting to other regulatory authorities and other disclosure regimes; preparers must ensure that AASB 124 disclosures are consistent with statutory registers and other public disclosures and that they do not inadvertently omit material overlaps or create contradictions (para 27; IG11).

Transition and versioning pitfalls

• The compilation and amendment history show different effective dates and transitional rules for amendments. Entities must identify which amending Standards apply to their reporting period (Compilation details; Aus28.1; Aus28.2; table of standards). Failure to apply the right version leads to non-compliance.

Document and retention requirements

• Although the Standard does not prescribe retention periods, the substantiation requirements and audit scrutiny mean entities should retain evidence demonstrating how related parties were identified, how materiality was assessed and how arm’s length assertions were supported.

Addressing these “gotchas” requires cross‑functional coordination across legal, treasury, procurement, payroll and finance teams; clear policies; and disciplined record-keeping.

The Standard prescribes what to disclose; compliance requires establishing processes, controls and documentation that produce auditable outputs. Below is a practical compliance checklist tied to the Standard’s paragraphs and guidance.

1. Governance and policy

• Adopt a written related party disclosure policy that references AASB 124, defines related parties per para 9, specifies roles and responsibilities for identification and reporting, and mandates documentation of judgements. Ensure Board or audit committee oversight of related party disclosures, given their sensitivity.

2. Identification of related parties (paras 9-12; para 10; IG3-IG6)

• Map group structure and legal ownership to identify parents, subsidiaries, associates, joint ventures and other entities within the group (para 9(b)(i)-(iv); Appendix definitions).
• Identify persons with control, joint control or significant influence and members of KMP, including directors and officers (para 9(a); IG3-IG6). For public sector entities, apply IG guidance to determine whether Ministers or similar officials are KMP.
• Consider close family definitions for linked persons (para 9: close family).
• Record the rationale for each related party determination, focusing on substance over legal form (para 10).

3. Capture transactional data (para 18; para 21)

• Establish systems to capture amounts of related party transactions, the amount of outstanding balances and commitments, and related terms and guarantees. Capture the nature of transactions listed in para 21 (sales, purchases, leases, loans, guarantees, etc.).
• Ensure intercompany staff/tax/treasury systems tag related party entries to permit reporting by category required in para 19 (parent; entities with joint control; subsidiaries; associates; joint ventures; KMP; other related parties).

4. KMP compensation disclosure (para 17; paras 17A, 18A)

• Compile KMP compensation totals and disaggregation by the five categories in para 17. Where KMP services are provided by a management entity, apply paras 17A and 18A: do not apply paragraph 17 to the internal compensation paid by the management entity, but disclose amounts incurred by the reporting entity for KMP services (IG7-IG8). Document management entity arrangements and any reimbursement obligations.

5. Substantiation for arm’s length claims (para 23)

• If asserting that related party transactions were on terms equivalent to arm’s length, obtain contemporaneous documentary evidence: pricing comparables, tender records, market quotes or independent valuations. Create a file for arm’s length substantiation for each relevant transaction.

6. Government-related entities and exemption procedure (paras 25-27; IG13-IG14)

• If the entity is government-related and proposes to use the paragraph 25 exemption, document the legal basis that the government controls, jointly controls or significantly influences the entity (para 9 definition; para 25). Prepare the alternative disclosures required by para 26: identify the government; describe the nature of relationship; disclose individually significant transactions in sufficient detail (para 26(b)(i)); and quantify or qualitatively describe collectively significant but individually immaterial transactions (para 26(b)(ii)). In determining what is individually significant, document the factors considered per para 27 and IG13.

7. Presentation by category (para 19; para 20)

• Present disclosures separately by the categories in para 19, and reconcile presentation with statement of financial position line items as required by AASB 101 (para 20). Aggregate similar items subject to para 24; identify items requiring separate disclosure.

8. Recording provisions and bad debt expense (para 18(c)-(d))

• Where related party balances are outstanding, assess and record provisions for doubtful debts. Disclose provisions and any bad or doubtful debt expense in the notes as required by para 18(c)-(d).

9. Parent and ultimate controlling party disclosures (para 13; Aus13.1)

• Disclose name of parent and ultimate controlling party; if the parent or ultimate controller is incorporated outside Australia, identify which are overseas and disclose the name of the ultimate controlling entity incorporated within Australia (Aus13.1). Retain consolidation documentation showing which parent produces consolidated statements publicly available.

10. Materiality and aggregation (para 24; IG11; BC17)

• Apply AASB 101 and AASB 108 materiality principles; for public sector entities, use IG11 and BC17 to guide decisions on not disclosing transactions occurring on the same terms as the general public where immaterial. Record materiality judgements and rationale.

11. Controls and audit trail

• Implement controls to ensure related party entries across ledgers and sub-systems are tagged and reconciled. Require management sign-off on related party disclosures and maintain an audit file containing entity maps, templates, substantiation evidence, board minutes for approvals and materiality analyses.

12. Disclosure text and notes

• Draft disclosure notes to meet minimum content of para 18 and alternative disclosures of para 26 where the government exemption applies. Include narrative on nature of relationships and policies for identifying related parties. Where using management entity carve-outs, explicitly state the nature of the arrangement and amounts incurred (paras 17A, 18A).

13. Timing and transitional considerations (Aus28.1; Compilation details)

• Determine which version of AASB 124 applies to the reporting period by reference to the compilation table and effective dates. For entities transitioning between tiers or applying amendments early, disclose that earlier application as required by Aus28.1 and related transitional notes.

14. Training and cross-functional engagement

• Provide training for finance, procurement, legal and executive teams about related party identification, contract tagging and documentation obligations. Ensure tendering and procurement procedures capture potential related party conflicts and that related party approvals are recorded.

15. Reconciliation with external disclosures

• Ensure consistency between AASB 124 disclosures and other statutory or public registers (ministerial registers, procurement disclosures, grant reporting), and document reconciliations to avoid contradictory public information (para 27; IG11).

16. Review by auditors and advisers

• Engage auditors early to review identification approaches, materiality assessments and draft disclosures. Where doubt exists about KMP status for public officeholders, consider obtaining legal advice documenting the factual analysis against IG3-IG6.

This compliance programme turns the Standard’s abstract requirements into actionable steps and a defensible audit trail. The Standard requires judgement and record-keeping; preparing for regulator or auditor scrutiny is therefore central to compliance.