IFRS No. 24 Disclosure of information about related parties

The purpose of creating IFRS 24

IFRS 24 was created to highlight the rules for disclosing information in financial statements about the impact on the organization's activities of related parties. Communication presupposes the presence of a determining influence of a party on any aspects of the organization’s existence.

of IFRS 24 effective from 02/09/2016 , which is an annex to the order of the Ministry of Finance of the Russian Federation dated December 28, 2015 No. 217n and replaced the previously used text introduced in the Russian Federation by the order of the Ministry of Finance of the Russian Federation dated November 25, 2011 No. 160n, indicates the need for disclosure in relation to related parties:

reasons determining the connection;
the essence of the relationship between them;
types of transactions performed;
quantifying the results of transactions, including the results of future relationships.

The standard is applicable both to individual legal entities (IFRS 27) and to those forming a group (IFRS 10). When preparing consolidated financial statements, data on intragroup transactions are excluded from total turnover, except in situations when it comes to investments measured through fair value or profit-loss.

For information on the report prepared to reflect profits and losses, read the material “Procedure for preparing a profit and loss report under IFRS.”

What determines the relationship between the parties?

The existence of a connection between parties in a business implies the ability, alone or jointly with another person, to influence decisions made by a related party, and may be due, for example, to the organization having:

subsidiaries;
joint ventures;
the ability to directly or indirectly influence the activities of a legal entity.

The results of such influence may affect the financial position:

the related parties themselves, who have the right, according to rules other than generally accepted ones, to set prices and sales volumes to each other;
one of the related parties that adjusts its relationship with a third party as a result of decisions made by the second related party.

Therefore, understanding the consequences of such interaction becomes extremely important for assessing the organization’s performance and possible risks in its activities.

Related parties for an organization can be both individuals and legal entities. It does not matter what kind of transactions are carried out between them and whether a fee is charged for this. The essence of the relationship matters.

An individual will be considered a related party if he is a member of the management of the organization, exercises control over it, or can otherwise influence the policies of the organization. Close family members of such an individual who directly influence his decisions may also be related parties.

A legal entity may be a related party to an organization in cases where it:

belongs to the same group of persons;
is a joint venture of the organization or is subject to its direct influence, as well as in the reverse picture of such relationships or if these situations occur in relation to another member of the group to which the organization belongs;
like the organization, it is a joint venture created by the same third party;
becomes a joint venture of a third party, and the organization has influence over this third party, as well as in the reverse situation;
generates any type of rewards for the organization’s employees based on the results of work or receives such rewards from the organization for its employees;
is controlled by the same individual as the organization, or this person has the ability to significantly influence decision-making in both legal entities;
is part of a group in which another member provides key management personnel to the organization itself or to one on which it depends.

Read about the consequences of the relationship between the parties for the calculation of taxes in the Russian Federation in the article “Interdependent persons in tax legal relations - 2016”.

New PBU 11/2008. Tell us about the director's salary in the financial statements

New PBU 11/2008 “Information about related parties”

, approved by order of the Ministry of Finance of the Russian Federation dated April 29, 2008 No. 48n, should be applied for the first time when preparing
annual
financial statements for 2008.

PBU 11/2000 “Information about affiliated persons” was declared invalid.
For whom?
If PBU 11/2000

was mandatory for use only for joint-stock companies, then the requirements of the new PBU 11/2008 are mandatory
for all commercial organizations
, with the exception of credit organizations.

PBU 11/2000

were allowed not to be used when preparing financial statements by small businesses.

New PBU 11/2008

may also not be used when preparing financial statements by small businesses.

An exception is made by small businesses that publish their financial statements in whole or in part in accordance with the legislation of the Russian Federation, constituent documents or on their own initiative - for them the use of PBU 11/2008 is mandatory.

Connected by one goal

In PBU 11/2000

we were talking about
affiliated
entities, which, according to clause 4 of PBU 11/2000, are recognized as legal entities and individuals capable of influencing the activities of legal entities and (or) individuals in accordance with the Law of the Russian Federation of March 22, 1991 No. 948-1 “On competition and restriction of monopolistic activities in commodity markets.”

This law establishes that affiliates

legal entities are:

– member of its Board of Directors

(supervisory board) or other collegial management body, a member of its collegial executive body, as well as a person exercising the powers of its sole
executive body
;

– persons belonging to that group of persons

to which this legal entity belongs;

– persons who have the right to dispose of more than 20 percent

the total number of votes attributable to voting shares or contributions constituting the authorized or share capital, shares of this legal entity;

– a legal entity in which this legal entity has the right to dispose of more than 20 percent

the total number of votes attributable to voting shares or contributions constituting the authorized or share capital, shares of this legal entity;

– if the legal entity is a member of a financial and industrial group

, its affiliates also include members of the Board of Directors (supervisory boards) or other collegial management bodies, collegial executive bodies of participants in the financial and industrial group, as well as persons exercising the powers of the sole executive bodies of participants in the financial and industrial group.

In PBU 11/2008

refers to related parties, that is, legal and (or) individuals capable of influencing the activities of the organization preparing financial statements, or on whose activities the organization preparing financial statements is able to influence.

In addition to affiliates recognized as such in accordance with Law No. 948-1, related parties

may also be:

– a legal and (or) individual registered as an individual entrepreneur and an organization preparing financial statements that participate in joint activities

;

– organization preparing financial statements and non-state pension fund

, which acts in the interests of employees of such an organization or another organization that is a related party of the organization preparing the financial statements.

As before, and in accordance with the new PBU 11/2008

, the list of related parties, information about which is disclosed in the financial statements of the organization preparing the financial statements, is established by such organization
independently
.

Reveal cards

As before, the entity preparing the financial statements discloses information about related parties in cases where:

- such an organization is controlled

or it is significantly
influenced
by a legal and (or) individual;

– such an organization controls or has significant influence over the legal entity;

– such an organization and legal entity are controlled or significantly influenced (directly or through third legal entities) by the same legal entity and (or) the same individual (the same group of individuals).

PBU 11/2008

for the first time deciphers the concept of
control
, explaining that a legal and (or) individual controls another legal entity when it has the ability
to determine decisions
made by another legal entity in order to obtain economic benefits from the activities of the latter.

As a rule, clause 7 of PBU 11/2008 defines this possibility when such a legal entity and (or) individual has:

– by virtue of its participation in a business company (partnership) or in accordance with the powers received from other persons, more than fifty percent

the total number of votes per voting shares (shares) in the authorized (share) capital of this business company (partnership);

– the right to dispose (directly or through its subsidiaries) of more than twenty percent

the total number of votes attributable to voting shares (shares) in the authorized (share) capital of this business company (partnership) or contributions constituting the authorized (share) capital, shares of this legal entity and has the ability to determine decisions made by such legal entity.

Like PBU 11/2000, PBU 11/2008 establishes that a legal entity and (or) individual has significant influence on another legal entity when it has the opportunity to participate in decision-making of another legal entity, but does not control it.

At the same time, PBU 11/2008 clarifies

that significant influence may occur due to participation in the authorized (share) capital, the provisions of the constituent documents, the concluded agreement, participation in the supervisory board and other circumstances.

What to report

The list of information has been changed

that must be disclosed in the financial statements (namely, in the explanatory note), if during the reporting period the organization preparing the financial statements conducted
transactions
with related parties.

A transaction between an entity preparing financial statements and a related party is any transaction involving the transfer (receipt) of assets, the provision (consumption) of services, or the creation (termination) of obligations (regardless of the receipt of payment or other consideration) between the entity preparing financial statements and related party.

Transactions with a related party can be, for example, the acquisition and sale of goods, works, services, rental of property and provision of property for rent, etc.

In addition to information about the character

relations with a related party,
the type of
transactions with it,
the volume
of transactions of each type (in absolute or relative terms) and
cost indicators
for operations not completed at the end of the reporting period (that is, information that had to be disclosed in the financial statements in accordance with PBU 11/ 2000),
the explanatory note will also need to indicate
:

– terms and conditions

implementation (completion) of settlements for operations, as well as the form of settlements;

– the amount of reserves

for doubtful debts at the end of the reporting period;

– the amount of written off accounts receivable

for which the statute of limitations has expired, other debts that are unrealistic for collection, including through the reserve for doubtful debts.

Information on the methods used to determine prices for each type of transaction with an affiliate, which was required to be reflected in the financial statements of PBU 11/2000, no longer needs

PBU 11/2008

contains a completely new requirement that the information required to be disclosed must be disclosed separately for each of the following groups of related parties:

– main business company (partnership);

– subsidiaries;

– predominant (participating) business entities;

– dependent business entities;

– participants in joint activities;

– key management personnel

organization that prepares financial statements.

For the purposes of PBU 11/2008, under the main management personnel

organization means managers (general director, other persons exercising the powers of the sole executive body of the organization), their deputies, members of the collegial executive body, members of the board of directors (supervisory board) or other collegial management body of the organization, as well as other officials vested with powers and responsibilities in matters of planning, management and control over the activities of the organization;

– other related parties.

Managers' remuneration

As part of information about related parties, the organization preparing financial statements discloses information on the amount of remuneration

paid by such organization to key management personnel in aggregate and for each of the following types of payments:

short-term rewards

– amounts to be paid during the reporting period and 12 months after the reporting date (
wages
for the reporting period, taxes accrued on it and other obligatory payments to the relevant budgets and extra-budgetary funds, annual paid leave for work in the reporting period, payment by the organization for treatment, medical care, utilities, etc. payments in favor of key management personnel);

long-term rewards

– amounts payable 12 months after the reporting date:

– remuneration upon termination of employment (payments (contributions) of the organization preparing financial statements under voluntary insurance agreements (non-state pension agreements) concluded in favor of key management personnel with insurance organizations (non-state pension funds), and other payments ensuring pension payments and other social guarantees for key management personnel upon completion of their working career);

– remuneration in the form of options of the issuer, shares, shares, participation interests in the authorized (share) capital and payments on their basis;

– other long-term remuneration.

Daughters and mothers

PBU 11/2000

provided that the financial statements may
not disclose
information about transactions:

– the parent organization with subsidiaries and between subsidiaries that are part of the same Group of interrelated organizations (that is, an association of subsidiaries and dependent companies) – in the consolidated financial statements;

– the parent organization with its subsidiaries – in the financial statements of the parent organization, when these statements are presented or published together with the consolidated financial statements;

– a subsidiary with a parent organization – in the financial statements of the subsidiary when the following conditions are simultaneously met: the parent organization and the subsidiary are legal entities under the laws of the Russian Federation; 100 percent of the voting shares or authorized capital of the subsidiary belong to the parent organization; The parent organization publishes consolidated financial statements.

New PBU 11/2008

does not provide for similar exceptions, that is, the above information is subject to disclosure in the financial statements.

Which parties are not considered related?

According to the provisions of IFRS 24, the following should not be considered related parties:

organizations that have the same manager or other key management representative, due to the presence of this circumstance alone, even if they can influence decisions made in both organizations;
participants in a joint venture only because they jointly exercise control over it;
persons simultaneously participating in financing;
trade union bodies;
utility services;
government agencies and government departments when they carry out normal business operations, even if this involves influencing the organization’s decision-making;
individual counterparties with whom there are normal business relationships, even if the amounts of turnover between them are significant.

What information needs to be disclosed

The amount of information disclosed depends on the existence of transactions between the entity and the related person and the nature of their relationship

Information must be provided on any transactions related to the transfer or receipt of assets, the provision or consumption of services, the emergence or termination of obligations. And even if these transactions are free of charge. This clarification was made by the Russian Ministry of Finance in the text of the new PBU 11/2008.

Thus, transactions with a related party, in particular, can be:

– purchase and sale of goods, works, services, fixed assets and other assets;

– rental of property and provision of it for rent;

– financial transactions, including the provision of loans;

– making contributions to authorized (share) capital;

– provision and receipt of security for the fulfillment of obligations (for example, pledges, guarantees, sureties).

The amount of information disclosed depends on the existence of transactions between the entity and the related person and the nature of their relationship

The new PBU 11/2008 slightly changes the list of the minimum information that needs to be disclosed about transactions. Thus, the methods that were used to determine the transaction price no longer need to be described.

At the same time, it will now be necessary to disclose information about the conditions and timing of settlements (completion) of transactions, as well as the form of settlements. In addition, the explanatory note will need to indicate the amount of reserves for doubtful debts and the amount of written off accounts receivable and other debts (including at the expense of the reserve).

Paragraph 10 of PBU 11/2008 requires disclosure of information separately for each of the following groups of related parties:

– main business company (partnership);

– subsidiaries;

– predominant (participating) societies;

– dependent organizations;

– participants in joint activities;

– key management personnel of the organization preparing financial statements.

The last group of related parties deserves special attention.

General features of reporting in the presence of related parties

Reporting containing information about related parties is characterized by the following features:

these reports complement other reports prepared by the organization;
it is formed even if there were no transactions between these parties during the reporting period;
if the organization is a subsidiary, but neither it nor its parent or controlling company prepares consolidated financial statements for public use, then information as a related party is given in relation to the company that prepares such statements, including data about the organization;
in relation to the operations carried out in the reporting period, their description and quantitative characteristics are provided, reflecting the turnover and balances on them, as well as the existence of contractual relations for future operations.

Disclosure of information should be carried out separately, highlighting the following data:

by parent company;
legal entities that jointly control the organization or have significant influence on its decisions;
subsidiaries;
associated (dependent) organizations;
joint ventures in which the organization participates;
key management personnel;
other related parties.

Who are the related parties

For an organization, related parties are legal entities and individuals who can influence its activities, as well as those whose activities the organization itself can influence (clause 4 of PBU 11/2008):

affiliated persons (according to the definition contained in the Law of the RSFSR dated March 22, 1991 No. 948-1 “On competition and restriction of monopolistic activities in commodity markets”);
organizations and entrepreneurs with whom the company conducts joint activities;
a non-state pension fund acting in the interests of employees of an organization or employees of a company that is its related party.

Paragraph 10 of PBU 11/2008 requires disclosure of information separately for each of the following groups of related parties:

main business company (partnership);
subsidiaries;
prevailing (participating) societies;
dependent organizations;
participants in joint activities;
key management personnel of the organization preparing financial statements.

Composition of disclosed information about related parties

Operations carried out by each related party must be broken down by type, reflecting the following information for each related party:

about the amounts of transactions;
balances of transactions, including forecasted ones, if the relationship is planned for the future;
conditions for carrying out operations, including all their features;
guarantees and provisions related to operations;
created reserves for existing doubtful debts;
amounts of bad (doubtful) debt written off during the reporting period.

In relation to management personnel classified as related parties, information is required on the amount of payments made to each of the managers in general and broken down by remuneration:

short-term nature (salary; social contributions; vacation and sick pay; bonuses; income from profits; provision of housing, transport, medical services, products);
long-term (sabbatical leaves and vacations related to length of service; long-term sick leave; incentive payments made at the end of the year);
related to the end of employment (pensions; payments upon retirement; insurance and medical care for retirees);
related to severance pay;
which are income from shares.

For information on accrual of income on shares carried out according to Russian standards, read the article “What is the procedure for distributing net profit (nuances)?”

Data on the costs of services provided by key management personnel must be highlighted in the reporting. At the same time, the organization has no obligation to disclose detailed data on them (both by person and by type of payment).

GLAVBUKH-INFO

Registered with the Ministry of Justice of the Russian Federation on May 26, 2008 N 11749

MINISTRY OF FINANCE OF THE RUSSIAN FEDERATION

ORDER dated April 29, 2008 N 48n

ON APPROVAL OF THE ACCOUNTING REGULATIONS “INFORMATION ABOUT RELATED PARTIES” (PBU 11/2008)

In order to improve legal regulation in the field of accounting and financial reporting and in accordance with the Regulations on the Ministry of Finance of the Russian Federation, approved by Decree of the Government of the Russian Federation of June 30, 2004 N 329 (Collected Legislation of the Russian Federation, 2004, N 31, Art. 3258; N 49, Art. 4908; 2005, N 23, Art. 2270; N 52, Art. 5755; 2006, N 32, Art. 3569; N 47, Art. 4900; 2007, N 23, Art. 2801 ; N 45, Art. 5491; 2008, N 5, Art. 411), I order: 1. Approve the attached Accounting Regulations “Information on Related Parties” (PBU 11/2008). 2. Recognize as invalid: Order of the Ministry of Finance of the Russian Federation dated January 13, 2000 N 5n “On approval of the Accounting Regulations “Information on Affiliated Persons” PBU 11/2000” (Order registered with the Ministry of Justice of the Russian Federation on May 10, 2000 , registration number 2215; Bulletin of normative acts of federal executive authorities, N 21, May 22, 2000; Rossiyskaya Gazeta, N 92-93, May 16, 2000); paragraph 3 of amendments and additions to regulatory legal acts on accounting, approved by Order of the Ministry of Finance of the Russian Federation of March 30, 2001 N 27n (Order registered with the Ministry of Justice of the Russian Federation on May 4, 2001, registration number 2693; Bulletin of regulatory acts of federal bodies executive power, No. 20, May 14, 2001; Rossiyskaya Gazeta, No. 91-92, May 16, 2001). 3. Establish that this Order comes into force with the annual financial statements for 2008.

Deputy Chairman of the Government of the Russian Federation - Minister of Finance of the Russian Federation A.L. KUDRIN

Appendix to the Order of the Ministry of Finance of the Russian Federation dated April 29, 2008 N 48n

ACCOUNTING REGULATIONS “INFORMATION ABOUT RELATED PARTIES” (PBU 11/2008)

I. General provisions

1. These Regulations establish the procedure for disclosing information about related parties in the financial statements of commercial organizations, with the exception of credit institutions (hereinafter referred to as the organization preparing the financial statements). 2. This Regulation does not apply when preparing reports developed for internal purposes by the organization preparing the financial statements; reporting compiled for state statistical observation; reporting information provided to the credit institution in accordance with its requirements; reporting information provided for other special purposes. 3. These Regulations may not be applied when preparing financial statements by small businesses, with the exception of these entities that publish their financial statements in whole or in part in accordance with the legislation of the Russian Federation, constituent documents or on their own initiative. 4. Legal and (or) individuals capable of influencing the activities of the organization preparing financial statements, or on whose activities the organization preparing financial statements is capable of influencing (related parties), may be: a) legal and (or) physical a person and an organization preparing financial statements that are affiliated entities in accordance with the legislation of the Russian Federation; b) a legal and (or) individual registered as an individual entrepreneur and an organization preparing financial statements that participate in joint activities; c) an organization preparing financial statements and a non-state pension fund that acts in the interests of employees of such an organization or another organization that is a related party of the organization preparing financial statements. 5. A transaction between the organization preparing the financial statements and a related party is considered to be any transaction involving the transfer (receipt) of assets, provision (consumption) of services or the emergence (termination) of obligations (regardless of the receipt of payment or other consideration) between the organization preparing the financial statements , and related party. Transactions with a related party can be: acquisition and sale of goods, works, services; acquisition and sale of fixed assets and other assets; rental of property and provision of property for rent; financial transactions, including the provision of loans; transfer in the form of a contribution to authorized (share) capital; provision and receipt of security for the fulfillment of obligations; other operations.

II. Related Party Disclosure

6. An organization preparing financial statements discloses information about related parties in cases where: such an organization is controlled or has significant influence on it by a legal entity and (or) individual;
such an organization controls or has significant influence over the legal entity; such an organization and legal entity are controlled or significantly influenced (directly or through third legal entities) by the same legal entity and (or) the same individual (the same group of individuals). 7. A legal and (or) individual, as a rule, has the opportunity to determine decisions made by another legal entity in order to obtain economic benefits from the activities of the latter (controls another legal entity), when such a legal and (or) individual has: by virtue of his participation in a business company (partnership) or in accordance with the powers received from other persons, more than fifty percent of the total number of votes attributable to voting shares (shares) in the authorized (share) capital of this business company (partnership); the right to dispose (directly or through its subsidiaries) of more than twenty percent of the total number of votes attributable to voting shares (shares) in the authorized (share) capital of this business company (partnership) or contributions constituting the authorized (share) capital of this legal entity and has the ability to determine decisions made by such legal entity. 8. A legal and (or) individual has significant influence on another legal entity when it has the opportunity to participate in decision-making of another legal entity, but does not control it. Significant influence may occur due to participation in the authorized (share) capital, provisions of the constituent documents, concluded agreement, participation in the supervisory board and other circumstances. 9. The list of related parties, information about which is disclosed in the financial statements of the organization preparing the financial statements, is established by such organization independently on the basis of these Regulations based on the content of the relationship between the organization preparing the financial statements and the related party, taking into account the requirement of priority of content over form. 10. If during the reporting period the organization preparing the financial statements carried out transactions with related parties, then at least the following information is disclosed in the financial statements for each related party: the nature of the relationship (in accordance with paragraph 6 of these Regulations); types of operations; volume of transactions of each type (in absolute or relative terms); cost indicators for operations not completed at the end of the reporting period; conditions and terms for carrying out (completion) of settlements for transactions, as well as the form of settlements; the amount of reserves formed for doubtful debts at the end of the reporting period; the amount of written off receivables for which the statute of limitations has expired, and other debts that are unrealistic for collection, including through the reserve for doubtful debts. Indicators that reflect similar relationships and transactions with related parties may be grouped, except in cases where their separate disclosure is necessary to understand the impact of transactions with related parties on the financial statements of the entity preparing the financial statements. 11. Information subject to disclosure in accordance with paragraph 10 of these Regulations must be disclosed separately for each of the following groups of related parties: the main business company (partnership); subsidiaries; predominant (participating) business entities; dependent business entities; participants in joint activities; key management personnel of the organization preparing financial statements. For the purposes of these Regulations, the main management personnel of the organization are understood as managers (general director, other persons exercising the powers of the sole executive body of the organization), their deputies, members of the collegial executive body, members of the board of directors (supervisory board) or other collegial management body of the organization, as well as other officials vested with authority and responsibility in matters of planning, management and control over the activities of the organization; other related parties. 12. As part of information about related parties, the organization preparing financial statements discloses information on the amount of remuneration paid by such organization to key management personnel in the aggregate and for each of the following types of payments: short-term remuneration - amounts payable during the reporting period and 12 months after the reporting date (wages for the reporting period, taxes accrued on it and other obligatory payments to the relevant budgets and extra-budgetary funds, annual paid leave for work in the reporting period, payment by the organization for treatment, medical care, utilities, etc. payments to benefit of key management personnel); long-term remuneration - amounts payable after 12 months after the reporting date: - post-employment remuneration (payments (contributions) to the organization preparing financial statements under voluntary insurance agreements (non-state pension agreements) concluded in favor of key management personnel with insurance organizations (non-state pension funds), and other payments that ensure payment of pensions and other social guarantees to key management personnel upon completion of their working career); — remuneration in the form of options of the issuer, shares, shares, participation interests in the authorized (share) capital and payments on their basis; — other long-term rewards. 13. If a legal entity and (or) individual controls another legal entity, or legal entities are controlled (directly or through third legal entities) by the same legal entity and (or) the same individual (the same group of individuals) , then the nature of the relationship between them is subject to description in the financial statements, regardless of whether transactions between them took place in the reporting period. 14. Information about related parties provided for by these Regulations is included in the explanatory note as a separate section. 15. The construction of analytical accounting should ensure the generation of information about related parties provided for by these Regulations. Attachments:

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Types of transactions for disclosing data on them

Information on transactions related to:

with the purchase and sale of goods, finished products and semi-finished products;
purchase and sale of property and other assets;
receipt and provision of services;
receiving and leasing;
transfer of research results;
transfer of rights under licensing agreements;
provision of financing, including through credits, borrowings, contributions to the management company, regardless of the form of these funds (cash or in kind);
provision of guarantees and provisions;
a contractual obligation to take any specific actions upon the occurrence (or non-occurrence) of certain specific events;
settlements for the obligations of the organization itself in connection with a related party or for the obligations of a related party that the organization must fulfill.

Information on the participation of parent and subsidiary companies in payments in favor of employees made under defined benefit plans, in which the risk is shared among group members, is also considered subject to disclosure (clause 42 of IFRS 19).

In some cases it is allowed:

disclose information similar in content in a condensed manner, if this does not affect the understanding of the impact on the financial statements;
highlight information about transactions with related parties carried out on generally accepted terms, if this is justified for reporting purposes.

To learn how explanatory notes to financial statements are drawn up according to Russian standards, read the material “Drafting an explanatory note to the balance sheet (sample).”

Nuances of government-related transactions

Compliance with the requirements for the composition of disclosed information becomes optional if the organization has a connection with government bodies acting as a controlling body (solely or jointly) or having influence on the activities of:

directly to the reporting organization;
another organization, the connection with which is due to the presence of this control on the part of the government body.

In this case, it will be sufficient to disclose in the reporting:

The name of the government body and the nature of the relationship with it.
The nature and amounts of significant transactions with it, while other (immaterial) transactions can be reflected in the aggregate. The division of operations by type for these purposes will be the same as in the generally established rules.

The use of its own judgment in assessing the materiality or immateriality of transactions requires the reporting entity to also consider factors such as:

the significant scale of the operation;
the presence of market or non-market conditions for its implementation;
the usual nature of the activity being carried out or the singularity of the operation;
disclosure of its essence to regulatory and supervisory authorities;
awareness of top management;
availability of shareholder approval.

Nature of the relationship between related parties

Previously, according to paragraph 6 of PBU 11/2000, information about related parties was disclosed in the financial statements if the reporting organization:

— was under the control or significant influence of another organization or individual;

— controlled or exercised significant influence over another organization;

— together with other organizations was under the common control of the same legal or natural person. This requirement was met both with direct control of a legal entity or individual, and with control through third organizations. A similar requirement should have been observed with general control carried out by the same group of persons.

Since 2008, a reporting entity has also been required to disclose related party information in its financial statements when it, together with other entities, is significantly influenced (directly or through third parties) by the same legal entity, individual or group of individuals. This is stated in paragraph 6 of PBU 11/2008.

Thus, information about related parties is included in the financial statements only when there is control or significant influence between the entities.

Control

What is meant by control is stated in paragraph 7 of PBU 11/2008. This is the ability of a legal entity or individual to determine decisions made by another legal entity and (or) individual in order to obtain economic benefits from the activities of the latter persons.

The same paragraph states that one organization (individual) controls another only in two cases:

- if one organization (individual) has more than 50% of the voting shares of another organization or more than 50% of the authorized capital of a limited liability company by virtue of its participation or in accordance with powers received from third parties. In this case we mean the main company. Since the parent company owns more than half of the voting shares or more than half of the authorized capital, it has the right to determine the decisions made by the subsidiary. In other words, the subsidiary is always under the control of the parent company;

- if one organization (individual) disposes itself or through a subsidiary of more than 20% of the voting shares of another organization or more than 20% of the authorized capital of a limited liability company. In this case we are talking about the dominant company.

However, the dominant company does not always have control over the dependent company. If the dominant company determines the management decisions of a dependent company, it means it controls the dependent organization. If it participates in decisions but does not determine them, the dominant entity is considered to have significant influence over the dependent entity.

Significant influence

A dependent relationship occurs when a legal entity or individual has significant influence over another organization, when it has the opportunity to participate in the decisions of that organization, but does not control it. This definition was given in the previous PBU 11/2000. It was also preserved in PBU 11/2008 (clause 8).

In addition, the new accounting standard describes situations where significant influence occurs. This happens due to:

— participation in the authorized (share) capital (less than 20%);

— provisions of the constituent documents;

— concluded agreement;

— participation in the supervisory board;

- other circumstances.

EXAMPLE

The authorized capital of JSC Millennium is 1,000,000 rubles. The founders of the company are the persons listed in the table.

Table. Shareholders of OJSC "Millennium" and shares of shares belonging to them

Shareholders	Share of ordinary shares owned by the shareholder, %
CJSC "Alfa"	70
LLC "Sigma"	22
Individuals	8

CJSC Alpha is the parent company of a group of interrelated organizations, which includes OJSC Millennium.

The company is managed by the general meeting of shareholders, the board of directors, the general director (sole executive body) and the board of the company (collegial executive body).

Thus, affiliates of Millennium OJSC who influence and control the activities of this joint stock company are the parent company Alpha CJSC, Sigma LLC, as well as the chairman, deputy chairman and each member of the board of directors, general director, chairman, deputy chairman and members of the board of directors of the company.

OJSC "Millennium" has a subsidiary - LLC "Omega". The organization's share in the authorized capital of this company is 90%.

In June 2007, OJSC Millennium acquired shares of OJSC Vega in the amount of 90,000 rubles, which is 15% of all shares of this organization.

In turn, Millennium OJSC is recognized as an affiliate of the subsidiary Omega LLC. Due to its predominant participation in its authorized capital, Millennium OJSC simultaneously controls and influences the activities of the subsidiary.

In relation to OJSC Vega, whose share in the authorized capital is less than 20%, OJSC Millennium is not an affiliate.

If there is control or significant influence, the new PBU 11/2008 requires, in addition to information about affiliates, to disclose information about other related parties that we have already discussed. If there is no control or significant influence between related parties, then there is no need to provide information about them in the financial statements.

The list of related parties, information about which must be reflected in the financial statements, is still determined by the reporting organization independently (clause 9 of PBU 11/2008). In this case, the principle of priority of economic content over legal form, common to the preparation of financial statements, must be observed. In other words, when compiling a list of related parties, one must proceed from the content of the relationship between the parties. The same principles apply when applying IFRS 24.

Features of application of the standard

The application of the standard is mandatory for reporting periods starting from 2011. Its early application is permissible if there is a reservation about this in the reporting.

The application of the standard since 2011 implies its use taking into account the changes made from the same year to IFRS 10, IFRS 11 and IFRS 12. Since 02/09/2016, these standards have been used in the text version attached to the order of the Ministry of Finance of Russia dated 12/28/2015 No. 217n.

Since January 2014, it is mandatory to take into account amendments to IFRS 24 adopted in terms of investment organizations and put into effect in the Russian Federation by Order of the Ministry of Finance of Russia dated May 7, 2013 No. 50n, in relation to:

providing information about investments measured through fair value or profit-loss, which should not be excluded from the statements upon consolidation;
use of the concept of investment organizations in the sense used in other IFRS documents (IFRS 10, IFRS 11, IFRS 27).

Since July 2014, it is mandatory to apply amendments made to the standard as a result of its annual improvements and put into effect in the Russian Federation by Order of the Ministry of Finance of Russia dated December 17, 2014 No. 151n. With these amendments, the text of the standard was supplemented in part:

list of related parties: they also now include a legal entity (or other member of the group to which it belongs) that provides key management personnel to the reporting organization or the one on which it depends;
eliminating the obligation to provide detailed disclosure of data on key management personnel (both by person and by type of payment);
the emergence of a requirement to indicate in the report data on the amounts of costs for services provided to key management personnel.

All types of amendments are allowed to be used before the date from which they became mandatory for use, but with a mandatory clause in the reporting about this. Early application of amendments entails early application of the provisions of the relevant standards amended simultaneously with them.

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Analogue of IFRS 24 in Russian accounting standards

The analogue of the standard in question in the Russian Federation is PBU 11/2008, approved by order of the Ministry of Finance of Russia dated 04/29/2008 No. 48n and currently used as amended on 04/06/2015. In general, both documents are very similar. They are distinguished by the following points:

PBU does not apply to credit institutions and allows for the non-application of its SMP;
the lists of parties considered related do not coincide, while IFRS describes a wider range of individuals who can be classified as related;
The PBU quantifies a number of communication criteria;
there is no requirement in the PBU to reflect projected balances for planned relationships in the report;
there are no clauses in the PBU about leaving in the consolidated statements information about investments assessed through fair value or profit-loss;
IFRS provides a more detailed list of types of transactions, information about which must be disclosed in the financial statements;
The PBU does not contain any reservations regarding the reflection of transactions related to communications with government agencies;
PBU does not allow retrospective application.

Who should apply PBU 11/2008

The previous PBU 11/2000 applied only to joint stock companies (except for banks). All small enterprises had the right not to disclose information about their affiliates in reporting.

There are significantly more organizations that must apply the new PBU 11/2008. These are all commercial companies, regardless of their form of ownership (except for banks). As for small enterprises, they now may not disclose information about related parties only on the condition that they should not be obliged to publish their financial statements (based on the law, constituent documents or their own initiative).

E. Tsivileva, editor-in-chief of the Appendix