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FINANCIAL ACCOUNTING 2.....GDB NO 1 (START DATE : 6 MAY 2016.......END DATE : 12 MAY 2016).......MARKS 10

               Graded Discussion Board 01

                  Financial Accounting II (MGT401)


Learning Objective: Students will be able to apply the principles of International Accounting Standards (IAS) 24.



Creative ltd. is a maker of spare parts for automobiles. Company executes its business through a business model that has functioned for quite a long time and has made the organization a successful business, which is ranked among top 20 business enterprises of its field by the business community. Creative ltd. has confidence in working with trustworthy and responsible vendors/dealers furthermore; it offers its products only to the enterprises that it can either control or practice ‘significant influence’ over. The details regarding business dealings are as follows:

  • Creative ltd. buys the raw material from Decent ltd, that is a reliable supplier. Because of the facts that Decent ltd. has always provided the required material of higher standards since last 5 years, that’s why Creative ltd. has never purchased anything from any other supplier. So, it can be said that Decent ltd is economically dependent on Creative ltd.
  • Creative ltd. sells 60% of its production to an enterprise that is owned by a director of Creative ltd and the remaining portion of the output to a company that is its "associate" as Creative ltd. possesses 25% of the share capital of that organization.
  • Creative ltd. stores its stock in a storeroom that is taken on lease from the spouse of its director. The lease rentals are decided at an arm’s length price.
  • Creative ltd. has granted a loan without interest to the company XYZ ltd. that is owned by the CEO of Creative ltd. the purpose of loan is to buy the delivery vans which the XYZ ltd. is utilizing for delivering the goods from the distribution center of the supplier to the warehouse utilized by Creative ltd. for storing its stock.                         

Requirement: As per IAS 24, which of the above mentioned transactions would be disclosed as related party transactions? Also justify your answer by giving valid reasons.  



Important Instructions:

1. Do not copy or exchange your answer with other students. Two identical / copied comments will be marked Zero (0) and may damage your grade in the course.

2. Obnoxious or ignoble answer should be strictly avoided.

3. Questions / queries related to the content of the GDB, which may be posted by the students on MDB or via e-mail, will not be replied till the due date of GDB is over.

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Replies to This Discussion

chanda kya matlab ??  .....ab aap hi kuch bta doo k iss gdb ka kya karna hai???

yar kisi ko kuch samuj nagi arahe hay

page num 8 me jo related party k points h un se match krna h kya

g bilkul zaria Ma'am page 8 pe jo usi sy match krna hy k konsa related hy konsa ni or kuj reason deny hy k kis base pe related unrelated hy

besht of luckyyyyyyy :P

Plz follow zahid usman comments

for further understanding read following then answer each point by giving logic with ref to IAS 24 as following

According to the International Accounting Standards (IAS) 24 a party is related to an entity if:
(a) Directly or indirectly through one or more intermediaries, it: − Controls, is controlled by, or is under common control with, the entity (this includes parents, subsidiaries and fellow subsidiaries); − Has an interest in the entity that gives it significant influence over the entity; or − Has joint control over the entity;
(b) It is an associate;
(c) It is a Joint Venture in which the entity is a ventured;
(d) It is the member of the key management personnel of the entity or its parents;
(e) It is a close member of the family of an individual referred to in (a) or (d);
(f) It is an entity that is controlled, jointly controlled or significantly influenced by; or for which significant voting power in such entity resides with, directly or indirectly, any individual referred to in (d) or (e); or
(g) It is a post employment benefit plan for the benefit of employees of the entity, or of any entity that is a related party of the entity.

First is not related transaction, all others are...Zahid usman it is cfm from net.

to zargham Ma'am first ka sirf yahi likh dy k yeh related transaction ni hy ????

In first

creative ltd only purchase  from reliable supplier since last 5 years  ..they not purchase any thing from another supplier ...so zargham you dont thing so..they are related to each other..............they are related party transaction...think about it

i think so that first one is not a related transaction

i agree 

first one is not a related transaction

why sweety.......it is not  related transaction ...can u explain the reason??



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