Related party transactions and disclosures

Family- and group-owned hospitality structures routinely transact with related distributors, landlords, and shareholders, and under IAS 24 these must be identified and disclosed regardless of whether pricing is at arm's length; missing a related party (especially one connected through indirect family or common-control links) understates disclosure and is a frequent audit finding that can undermine trust in the financial statements.

Are any suppliers, landlords, franchisors, or lenders owned or controlled by shareholders, directors, or their close family members, and have these relationships and the terms of transactions with them been identified? Is key management personnel compensation (short-term benefits, EOSB, any share-based payments) separately identified and disclosed in total and by category? Are intercompany outlet transfers, central kitchen charges, or shared service allocations priced on a basis consistent with the group's stated related-party pricing policy, and is that basis disclosed?

1. Map the full ownership and governance structure of the group: shareholders, their close family members, directors, key management personnel, and any entity any of these parties controls, jointly controls, or significantly influences.
2. For every counterparty (supplier, landlord, lender, customer), ask whether it is owned, controlled, or significantly influenced by any party identified in step 1, including indirect links (e.g., a director's sibling's company) -- do not rely solely on shared branding as the identification test.
3. Identify related parties even where no transactions occurred in the period; the relationship itself may require disclosure if control exists.
4. For each identified related party, capture: nature of the relationship, description and amount of transactions (purchases, rent, loans, management fees, compensation), and outstanding balances at period end, separately from third-party amounts.
5. Determine and disclose whether transactions are priced on an arm's-length basis, and if a statement to that effect is made, ensure it is substantiated.
6. Separately identify and disclose key management personnel compensation by category (short-term benefits, post-employment benefits, other long-term benefits, termination benefits) even if included within a broader payroll line.
7. Confirm disclosure covers terms and conditions (security, guarantees, settlement terms) of outstanding balances, not just the net amount.

There is no special measurement basis under IAS 24 itself -- related party transactions are measured and recognized under the applicable IFRS for that transaction type (e.g., a shareholder loan is measured at amortized cost under IFRS 9, inventory purchases from a related distributor at cost/transaction price). What IAS 24 adds is the disclosure obligation: capture the gross transaction value and outstanding balance for each related party category, and where a loan carries a non-market interest rate (e.g., interest-free shareholder loan), assess whether this indicates a need to consider the substance of the arrangement (e.g., an interest-free loan from a shareholder may in substance include a capital contribution element, which requires judgment on presentation).

Disclose: names/categories of related parties and nature of relationships; total amount of transactions by category (purchases, sales, rent, loans advanced/repaid, management fees, guarantees); outstanding balances and their terms (secured/unsecured, interest rate, repayment terms, nature of consideration for settlement); any provision for doubtful debts related to related party balances and expense recognized on such debts; key management personnel compensation by category; a statement (only if substantiated) on whether transactions were on arm's-length terms; disclosure of relationships with control even absent transactions.

1. Identifying only direct shareholders as related parties and missing entities controlled by close family members (siblings, adult children) or by common control chains.
2. Disclosing only a net related-party balance instead of gross transaction volume and outstanding balance separately.
3. Omitting key management personnel compensation entirely, or burying it within a general staff cost line without separate disclosure.
4. Asserting transactions are 'at arm's length' without evidence (e.g., a benchmarking or market price comparison) to support the statement.
5. Failing to disclose related party relationships where control exists but no transactions occurred in the period.