Related Party Transactions

BACKGROUND

Related parties need to be defined and guidance on reporting related party transactions need to be developed in the CPA Canada Public Sector (PSA) Handbook to help users of financial statements understand their effects on the financial position and performance of an entity.

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Transactions between related parties may not be undertaken under the same terms as those between unrelated parties. Sufficient information about these transactions would enable users of financial statements to assess their financial significance on the reporting entity.     

This project will address recognition, measurement and disclosure of related party transactions.

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PROJECT NEWS

Basis for Conclusions – Inter-Entity Transactions – Section PS 3420
March 2, 2015. This document sets out how PSAB reached its conclusions. As well, it sets out significant matters arising from comments received in response to its Exposure Drafts and indicates how the Board dealt with the issues raised.

Basis for Conclusions – Related Party Disclosures – Section PS 2200
March 2, 2015. This document sets out how PSAB reached its conclusions. As well, it sets out significant matters arising from comments received in response to its Exposure Drafts and indicates how the Board dealt with the issues raised.

PSAB Decision Summary – December 15-16, 2014
PSAB reviewed responses to its April 2014 Re-exposure Draft, “Related Party Transactions.” There was general support among the respondents for the proposed standards. After discussing the responses and the changes proposed by the task force to address the comments, PSAB approved two new Handbook Sections — Related Party Disclosures and Inter-entity Transactions.

Re-exposure Draft – Related Party Transactions
April 24, 2014. The Board has issued a Re-exposure Draft that proposes standards dealing with related party disclosures and inter-entity transactions. Stakeholders are encouraged to submit their comments, on the form provided, by September 15, 2014.

PSAB Decision Summary – March 20-21, 2014
PSAB agreed to amend the June 2013 Re-exposure Draft, “Related Party Transactions,” to better reflect the different scope of the disclosure component and the recognition and measurement guidance.

PSAB approved a re-exposure draft that will propose two new Sections, Related Party Disclosures, and Inter-entity Transactions.

PSAB Decision Summary – December 12-13, 2013
PSAB reviewed responses to its June 2013 Re-exposure Draft and the proposed standard based on comments from respondents. PSAB provided feedback on the document and requested that a revised draft be prepared for its consideration at the March 2014 meeting.

Re-exposure Draft – Related Party Transactions
June 7, 2013. The Board has issued a Re-exposure Draft that proposes a new Handbook Section dealing with related party transactions. Stakeholders are encouraged to submit their comments, on the form provided, by September 4, 2013.

PSAB Decision Summary – March 21-22, 2013
PSAB reviewed responses to its Exposure Draft. It agreed to address concerns raised by respondents, including revised guidance on key management personnel and measurement of related party transactions. These changes are significant enough to warrant re-exposure.

PSAB considered a draft re-exposure draft and approved the revised principles with suggestions for changes to the document. PSAB is expected to approve the re-exposure draft with the requested changes before June 2013.

PSAB Decision Summary – December 13-14, 2012
PSAB reviewed responses to its Exposure Draft on related party transactions.

Exposure Draft – Related Party Transactions
September 18, 2012. PSAB has issued an Exposure Draft that proposes a new Handbook Section dealing with related party transactions. Stakeholders are encouraged to submit their comments, on the form provided, by November 21, 2012.

PSAB Decision Summary – June 26-27, 2012
PSAB approved an exposure draft on this topic. The proposals would require disclosure of sufficient information about transactions between related parties to help users assess their effect on the financial position and financial performance. The exposure draft identifies:

  • which parties are related;
  • the extent to which related party transactions would be recognized in the financial statements of both the provider and recipient organizations;
  • the appropriate basis of measurement for recognized  transactions; and
  • disclosure requirements for transactions including those that have not been given accounting recognition.

The exposure draft also proposes the following:

  • Related party transactions other than contributed goods and services should be recognized by both parties.
  • When there is a policy of allocating costs for the provision of goods and services, the revenues and expenses should be reported on a gross basis.
  • Related party transactions should be recorded at the exchange amount, which could be the carrying amount, the consideration paid or received, or fair value.
  • If the exchange amount differs from the carrying amount, the gain or loss should be recognized.
  • Contributed goods and services may be recognized or disclosed.

PSAB Decision Summary – March 21-23, 2012
PSAB reviewed responses to its Invitation to Comment on definition and disclosure and its Issues Paper on recognition and measurement. Respondents were generally supportive. PSAB considered a draft exposure draft responding to comments received. The Board requested a number of revisions to be made for consideration at a future PSAB meeting.

Related Party Transactions – Recognition and Measurement
October 5, 2011. PSAB has issued an Issue Paper that seeks views on recognition and measurement of related party transactions as well as information on how these transactions are currently accounted for and reported. Comments, on the form provided, are requested by November 14, 2011.

Related Party Transactions – Definition and Disclosure
October 5, 2011. PSAB has issued an Invitation to Comment that seeks input on key principles and definitions that the Board expects to include in a future exposure draft. Comments, on the form provided, are requested by November 14, 2011.

PSAB Decision Summary – June 23-24, 2011
PSAB approved an invitation to comment on the disclosure of related party transactions for governments and government organizations that apply the PSA Handbook.  An accompanying issues paper will explore the issues around the recognition and measurement of related party transactions and the potential implications of including such standards in the PSA Handbook.  

The intent of the invitation to comment is to seek the input of stakeholders regarding the preliminary views of the Board on the definition of related parties and nature and extent of the proposed disclosures.  The objective of the disclosures would be to provide sufficient information to users to allow them to understand the impact of related party transactions on the financial position and results of a public sector entity.  The accompanying issues paper will seek input from PSAB stakeholders on the need for principles on the recognition and measurement of related party transactions.  Specifically, it will ask for examples of related party transactions and information about current practices for recognizing and measuring related party transactions in the financial statements of governments and government organizations.

It is expected these documents will be issued for comment this summer with comments due in the fall of 2011.

PSAB Decision Summary – March 24-25, 2011
PSAB considered working drafts of statements of principles and related issues papers on appropriations and related party transactions. The Board provided input to the Task Force and requested further exploration of some issues.

Regarding related party transactions, the Board asked the Task Force to further consider a number of issues including: disclosure versus recognition and measurement; significant influence; and intra-entity allocations.

PSAB Decision Summary – December 9-10, 2010
PSAB considered a draft Statement of Principles (SOP) on its Related Party Transactions project and received an update on its Appropriations project.  

PSAB suggested the SOP focus on providing information about intra-government reporting entity transactions.  The Board also wants to further consider the issues relating to inter-organizational transactions that have not been given accounting recognition and non-monetary transactions. A revised draft SOP is expected to be presented at PSAB’s March 2011 meeting.

PSAB Decision Summary – September 23-24, 2010
A project proposal was approved by PSAB that will address related party transactions and appropriations.  At its June 2010 meeting, PSAB deferred approving this project proposal due to a lack of staff resources.  Since then, resources have become available.  These two topics were formerly included in the “Entity Level Financial Statements,” project; however PSAB has decided that the issues should be dealt with in the broader context of reporting by all public sector entities.

PSAB Decision Summary – June 14-15, 2010
At its November 23-24, 2009 meeting, PSAB discussed the responses to the July 2009 Statement of Principles, “Entity Level Financial Statements,” and agreed with the proposal by the Task Force to reconstitute the project. Two of the topics in that project were related party transactions and appropriations. PSAB asked staff to prepare project proposals on these two topics for consideration at a future meeting.

A project proposal that would address both related party transactions and appropriations was considered by PSAB at its June 2010 meeting. Given the Board’s priority to resolve the issues in the government transfers and financial instruments projects as well as advancing its review of the conceptual framework, the Board elected not to approve the project for inclusion in PSAB’s technical agenda at this time given available staff resources.

 

Disclaimer: This project summary has been prepared for information purposes only. Decisions reported are tentative and reflect only the current status of discussions on this project, which may change after further Board deliberations. Decisions to publish Handbook material are final only after a formal ballot process.