Question: Is A JV A Related Party?

Related parties are often involved in cases of fraudulent financial reporting, as highlighted in many major corporate scandals.

Transactions with related parties provide scope for distorting financial information in financial statements and hiding the economic substance of transactions or fraud in companies..

For FRS 102 and FRSSE 2015 a related party is a person or entity that is related to the entity that is preparing its financial statements (the reporting entity).

What is an arm’s length transaction?

An arm’s length transaction refers to a business deal in which buyers and sellers act independently without one party influencing the other.

“Related Party Transaction” means any transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships, in which (i) the Company or any of its subsidiaries is or will be a participant, and (ii) any Related Party has or will have a direct or indirect interest.

If an entity has related party transactions, it shall disclose the nature of the related party relationship as well as information about the transactions, outstanding balances and commitments necessary for an understanding of the potential effect of the relationship on the financial statements.

Examples of common transactions with related parties are: Sales, purchases, and transfers of real and personal property. Services received or furnished, such as accounting, management, engineering, and legal services. Use of property and equipment by lease or otherwise.

Dividends to directors do meet the definition of related party transactions and are disclosable as such.

Related companies are companies that do not have an arm’s-length relationship (e.g., a relationship involving independent, competing interests). This could be due to both companies being part of the same business group or could stem from family or personal ties between officials of two companies.

The reporting enterprise should disclose the following:The name of the transacting related party;A description of the relationship between the parties;A description of the nature of transactions;Volume of the transactions either as an amount or a part thereof;More items…•

Related parties include affiliates; other entities for which investments are accounted for by the equity method by the entity; trusts for benefit of employees; and principal owners, management, and members of immediate families.

Who are related parties?(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.

The most common types of related parties are business affiliates, shareholder groups, subsidiaries, and minority-owned companies. Related-party transactions can include sales, leases, service agreements, and loan agreements.

Related Persons means, with respect to any Person, each Affiliate of such Person and each director, officer, employee, agent, trustee, representative, attorney, accountant and each insurance, environmental, legal, financial and other advisor and other consultants and agents of or to such Person or any of its Affiliates …