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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.

 

Scenario:                                                     

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.

For Detailed Instructions please see the GDB Announcement


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Replies to This Discussion

IAS 24 Related Party Disclosures
as issued at 1 January 2012. Includes IFRSs with an effective date after 1 January 2012 but not the IFRSs they
will replace.
This extract has been prepared by IFRS Foundation staff and has not been approved by the IASB. For the requirements
reference must be made to International Financial Reporting Standards.
The objective of this Standard 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, including
commitments, with such parties.
A related party is a person or entity that is related to the entity that is preparing its financial statements (in this
Standard referred to as the ‘reporting entity’).
(a) A person or a close member of that person’s family is related to a reporting entity if that person:
(i) has control or joint control over the reporting entity;
(ii) has significant influence over the reporting entity; or
(iii) is a member of the key management personnel of the reporting entity or of a parent of the reporting
entity.
(b) An entity is related to a reporting entity if any of the following conditions applies:
(i) The entity and the reporting entity are members of the same group (which means that each parent,
subsidiary and fellow subsidiary is related to the others).
(ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a
member of a group of which the other entity is a member).
(iii) Both entities are joint ventures of the same third party.
(iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity.
(v) The entity is a post-employment benefit plan for the benefit of employees of either the reporting entity
or an entity related to the reporting entity. If the reporting entity is itself such a plan, the sponsoring
employers are also related to the reporting entity.
(vi) The entity is controlled or jointly controlled by a person identified in (a).
(vii) A person identified in (a)(i) has significant influence over the entity or is a member of the key
management personnel of the entity (or of a parent of the entity).

mujhey yeh valid reason nahin lag rahi.....main to inn tamam ka barey mein seprately likha kar valid reason k saath submit kar doo ga ....k yeh tamam related party transactions hain

 sweety bba this is totally copy past this only you post abut IAS 24 but GDB is requirement  discuss that four points according IAS-24.not only write IAS-24.

 sweety bba this is totally copy past this only you post abut IAS 24 but GDB is requirement  discuss that four points according IAS-24.not only write IAS-24.

complete correct answer kohe upload kery ga plz ap log confuse ker rahy ho

Sweety BBA you copy paste only the IAS-24 but the GDB requirement according to IAS-24 discuss that 4 point.

Sweety BBA you copy paste only the IAS-24 but the GDB requirement according to IAS-24 discuss that 4 point.

The second and forth transactions would be disclosed as related party transactions

.
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


Reason: according to IAS 24,(b)(i) The entity and the reporting entity are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others).so this transaction would be treated as related party transaction.


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.


Reason: This transaction is also treated as related part transaction because according to IAS 24 (b)(viii) The entity, or any member of a group of which it is a part, provides key management personnel services to the reporting entity or to the parent of the reporting entity(viii) The entity, or any member of a group of which it is a part, provides key management personnel services to the reporting entity or to the parent of the reporting entity
In this transaction CEO of the company is the person who provides key management personnel services to the reporting company.

i sumbit this GDB , further w8 is more confusion so .......

same here kuj v thek sy smjh ni arahi bsh Allah ka name ly kr submit hi krdi :(

1st n 3rd k bary main kia khyal hy apka phir??? 1st one to ni hy related par 3rd one how u can say ????

ap logo ko cpe past sy matlab hai ya pir solution

Hy plz any one upload solution of this gdb i'm much confused   

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