The objective of this standard is very clear: it is to "ensure that an entity’s financial statements contain the disclosures necessary to draw attention to the possibility that its financial position and profit or loss may have been affected by the existence of related parties and by transactions and outstanding balances with them" (IAS 24.1). However, its implementation raises a number of issues, such as:
- What is the definition of a related party?
- What types of key management personnel meet the definition of
- related party?
- When should a shareholder be considered as a related party?
Some clues were provided by the European market regulators and the Mazars survey published in 2006. The results of the survey showed wide divergences between the companies in the Eurostoxx 50. In addition, the IASB published two exposure drafts on this subject in February 2007 and December 2008.
Two years after our first survey, we have decided to assess the current situation on this complex issue. We have focused on six key points in the financial statements as of December 31st, 2007 for companies in the Eurostoxx 50. Each point compares the provisions of IAS 24 with current practices observed.