A party (person, entity) that has a connection with an entity (a reporting entity) preparing its financial statements. This connection involves a transfer of resources, services or obligations between the two sides (a reporting entity and a related party), whether on a reciprocal or nonreciprocal basis (collectively known as related-party transactions).
A related party may be a person or close member of his/ her family who is related to a reporting entity in any of the following situations:
- that person can exercise direct control or joint control over the reporting entity.
- significant influence can be exercised by that person over the reporting entity.
- that person is a member of the management team of the reporting entity or its parent entity.
A related party may also be an entity relating to a reporting entity, where the connection is established by virtue of any of the following scenarios, among others:
- the two entities are members of the same group.
- one entity is an associate or joint venture of the other or of a group of which the other is a member.
- the two entities are joint ventures of the same third party.
- the two entities have a connection with the same third party: one as a joint venture and the other as an associate.
