A parent entity has a wholly owned subsidiary. During the year, the subsidiary had no transactions of any kind with the parent or with any other related party. Under IAS 24, must the parent-subsidiary relationship still be disclosed in the subsidiary's financial statements?
- No — IAS 24 only requires disclosure once at least one transaction has occurred between the related parties during the reporting period
- No — related party disclosures apply only to transactions with key management personnel, not to relationships between a parent and its subsidiaries
- Yes, but only if the subsidiary is not wholly owned, since IAS 24 exempts wholly owned subsidiaries from disclosing the parent relationship
- Yes — IAS 24 requires disclosure of the relationship between a parent and its subsidiaries irrespective of whether there have been transactions between them
Why D? And why not the others?
Correct answer: D. Yes — IAS 24 requires disclosure of the relationship between a parent and its subsidiaries irrespective of whether there have been transactions between them
IAS 24 requires disclosure of the relationship between a parent and its subsidiaries irrespective of whether there have been transactions between them, because the existence of that close relationship can itself affect how users assess the entity's financial position and performance, separately from whatever transactions may or may not have occurred. The option requiring at least one transaction before disclosure is triggered misreads the standard's disclosure-only approach to relationships, which is explicitly not conditioned on any transaction having taken place. The option limiting related party disclosures to key management personnel is far too narrow: IAS 24's definition of a related party also expressly covers parents, subsidiaries, fellow subsidiaries, associates and joint ventures, so restricting the scope to key management personnel compensation ignores the parent-subsidiary category this scenario is actually about. The option claiming a blanket exemption for wholly owned subsidiaries invents a carve-out that IAS 24 does not contain; the standard's requirement to disclose the parent-subsidiary relationship itself applies regardless of the percentage of ownership held.
Source: IAS 24 Related Party Disclosures, paragraph 13 (disclosure of parent-subsidiary relationships irrespective of transactions)