AASB 130 - Disclosure in the Financial Statements of Banks and Similar Financial Institutions - July 2004
Related Party TransactionsRelated Party Transactions
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Related Party Transactions
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AASB 124 Related Party Disclosures deals generally with the disclosures of related party relationships and transactions between a reporting entity and its related parties. In some countries, the law or regulatory authorities prevent or restrict banks entering into transactions with related parties whereas in others such transactions are permitted. AASB 124 is of particular relevance in the presentation of the financial report of a bank in a country that permits such transactions.
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Certain transactions between related parties may be effected on different terms from those with unrelated parties. For example, a bank may advance a larger sum or charge lower interest rates to a related party than it would in otherwise identical circumstances to an unrelated party; advances or deposits may be moved between related parties more quickly and with less formality than is possible when unrelated parties are involved. Even when related party transactions arise in the ordinary course of a bank’s business, information about such transactions is relevant to the needs of users and its disclosure is required by AASB 124.
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When a bank has entered into transactions with related parties, it is appropriate to disclose the nature of the related party relationship as well as information about the transactions and outstanding balances necessary for an understanding of the potential effects of the relationship on the financial report of the bank. The disclosures are made in accordance with AASB 124 and include disclosures relating to a bank’s policy for lending to related parties and, in respect of related party transactions, the amount included in:
(a) each of loans and advances, deposits and acceptances and promissory notes; disclosures may include the aggregate amounts outstanding at the beginning and end of the period, as well as advances, deposits, repayments and other changes during the period;
(b) each of the principal types of income, interest expense and commissions paid;
(c) the amount of the expense recognised in the period for impairment losses on loans and advances and the amount of any allowance at the reporting date; and
(d) irrevocable commitments and contingencies and commitments arising from off balance sheet items.