1. What IND AS 24 Covers — Objective and Scope
IND AS 24 is a disclosure-only standard — it doesn't change how any transaction is recognised or measured, and it doesn't require related party transactions to be priced at arm's length. Its objective is to ensure that financial statements give users enough information to understand that the reporting entity's financial position and profit or loss may have been affected by the existence of related parties, and by transactions and outstanding balances (including commitments) with them — because related party relationships can affect pricing, terms, and even whether a transaction happens at all, in ways an outside reader wouldn't otherwise detect.
2. Control, Joint Control and Significant Influence
Three levels of relationship anchor the related party definition, each carried over from IND AS 110, 111 and 28 respectively:
| Relationship | Meaning |
|---|---|
| Control | The power to govern the financial and operating policies of an entity so as to obtain benefits from its activities — typically through ownership of more than half the voting power, though control can exist with less |
| Joint control | The contractually agreed sharing of control, where decisions about relevant activities require unanimous consent of the parties sharing control |
| Significant influence | The power to participate in the financial and operating policy decisions of an entity, without having control or joint control over those policies — generally presumed at 20% or more of voting power |
3. Who Is a Related Party — The Full Definition
A person or a close member of that person's family is related to a reporting entity if that person has control, joint control, or significant influence over the entity, or is a member of its key management personnel. An entity is related to the reporting entity if any of the following apply:
- The two entities are members of the same group (parent, subsidiaries and fellow subsidiaries are all related to each other)
- One entity is an associate or joint venture of the other (or of a member of a group of which the other is a member)
- Both entities are joint ventures of the same third party
- One entity is a joint venture of a third entity, and the other is an associate of that same third entity
- The entity is a post-employment benefit plan for the benefit of employees of either the reporting entity or an entity related to it
- The entity is controlled or jointly controlled by a person identified above
- A person with control or joint control over the reporting entity has significant influence over the entity, or is a member of its key management personnel
- The entity, or any member of a group of which it is a part, provides key management personnel services to the reporting entity or its parent
4. Key Management Personnel and Close Family Members
Key management personnel (KMP) are the persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly — this explicitly includes any director, executive or non-executive, and is a substance-based test centred on actual decision-making authority, not job title.
Close family members of a person are those family members who may be expected to influence, or be influenced by, that person in their dealings with the entity — typically including the person's spouse or domestic partner, children, children of the spouse/partner, and dependants of the person or their spouse/partner. This is a facts-and-circumstances test, not a fixed legal list of relatives.
5. Relationships That Are NOT Automatically Related Parties
IND AS 24 explicitly clarifies that the following are not, on their own, related parties: two entities simply because they have a director or key manager in common; two joint venturers simply because they share joint control of a joint venture; providers of finance, trade unions, public utilities, and government departments/agencies simply through the normal course of dealing with the entity (even if they can affect its freedom of action); and a single customer, supplier, franchisor, distributor or general agent with whom the entity transacts a significant volume of business, purely because of that economic dependence. Substance always governs — if such a relationship also independently meets one of the specific criteria above, it is still a related party.
6. What Must Be Disclosed
Regardless of whether there have been any transactions, an entity discloses the relationship between a parent and its subsidiaries, and the name of its ultimate controlling party (and the next most senior parent that produces publicly available financial statements, if the ultimate controlling party doesn't). Where there have been related party transactions, the entity discloses the nature of the relationship, and for each category of related party:
- The amount of transactions
- The amount of outstanding balances, including their terms and conditions (whether secured, the nature of consideration for settlement, and details of any guarantees given or received)
- Provisions for doubtful debts related to those outstanding balances
- The expense recognised for bad or doubtful debts from related parties
These disclosures are made separately for each category: the parent, entities with joint control or significant influence over the entity, subsidiaries, associates, joint ventures, key management personnel, and other related parties.
7. Key Management Personnel Compensation
KMP compensation is disclosed in total and broken down by category, mirroring the IND AS 19 employee benefit categories:
| Category | Examples |
|---|---|
| Short-term employee benefits | Salary, bonus, non-monetary benefits |
| Post-employment benefits | Gratuity, pension contributions |
| Other long-term benefits | Long-service awards, deferred compensation not classified elsewhere |
| Termination benefits | Severance or retirement payouts |
| Share-based payment | ESOPs and other equity-settled or cash-settled awards |
8. The Government-Related Entities Exemption
A reporting entity is exempt from the detailed transaction-level disclosures above for transactions with a government that has control, joint control or significant influence over it, and with another entity that is a related party purely because the same government controls, jointly controls or significantly influences both. Where this exemption is used, the entity still discloses the name of the government and the nature of its relationship, plus qualitative and (if significant) quantitative information about the nature and amount of individually or collectively significant transactions — a lighter-touch disclosure recognising that fully cataloguing every transaction with every other government-controlled entity would be impractical.
9. Worked Example — Mapping a Group's Related Parties
Scenario: Orbit Manufacturing Ltd is 65%-owned by Orbit Holdings Pvt Ltd. Orbit Manufacturing holds 30% of Zenith Components Pvt Ltd (an associate) and jointly controls Vertex JV Ltd (50:50 with an unrelated third party). Mr. Rao is Orbit Manufacturing's Managing Director, and his spouse runs a proprietorship, Rao Logistics, that provides transport services to Orbit Manufacturing.
| Party | Relationship | Related party? |
|---|---|---|
| Orbit Holdings Pvt Ltd | Parent (65% control) | Yes — always disclosed, transactions or not |
| Zenith Components Pvt Ltd | Associate (30%, significant influence) | Yes |
| Vertex JV Ltd | Joint venture (joint control) | Yes |
| Mr. Rao | Managing Director — key management personnel | Yes |
| Rao Logistics | Controlled by Mr. Rao's spouse (close family member of KMP) | Yes — entity controlled by a close family member of KMP |
| Vertex JV Ltd's other 50% joint venturer | Fellow joint venturer, no other relationship | No — sharing joint control alone does not make them related to each other |
Every transaction between Orbit Manufacturing and Rao Logistics — however small, and even if priced at normal commercial rates — must be disclosed, because the relationship itself (not the pricing) is what triggers disclosure.
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| Aspect | Old IGAAP (AS 18) | IND AS 24 |
|---|---|---|
| Government-related entities | No specific exemption — full disclosure required for all such entities individually | Exemption available for entities related only through common government control, with lighter qualitative disclosure |
| Definition scope | Narrower — did not explicitly address joint control-based relationships in the same structured way | Explicitly covers control, joint control and significant influence, aligned with IND AS 110/111/28 |
| KMP compensation categories | Less granular breakdown | Required breakdown mirrors IND AS 19's five employee benefit categories |
| "Not related" clarifications | Less explicit guidance | Explicitly lists relationships (common director, shared joint venturer, economic dependence alone) that don't automatically create related party status |
| Ultimate controlling party disclosure | Similar requirement | Same requirement, with more explicit guidance on the "next most senior parent" fallback |
11. Common Mistakes CAs Make
Error 1 — Assuming arm's-length pricing removes the disclosure requirement. IND AS 24 requires disclosure of related party transactions regardless of pricing — a transaction priced at normal market rates is still disclosable if the parties are related.
Error 2 — Treating a shared director alone as sufficient to make two companies related. A common director doesn't automatically create a related party relationship between the two companies unless another substantive criterion (like actual control or significant influence) is also met.
Error 3 — Missing entities controlled by a KMP's close family member. A proprietorship or company controlled by the spouse, child, or dependant of a director or key manager is a related party — this category is frequently overlooked because the entity itself has no direct link to the reporting company.
Error 4 — Disclosing only the transaction amount, without the outstanding balance and its terms. IND AS 24 requires disclosing outstanding balances too — including whether they're secured, the nature of settlement, and any guarantees — not just the flow of transactions during the period.
Error 5 — Applying the government exemption too broadly. The exemption applies only where the relationship arises purely from common government control — it doesn't excuse disclosure for a government-related entity that is also related to the reporting entity through some other, independent criterion (e.g. it's also an associate).
12. FAQs
Who is considered a related party under IND AS 24?
A related party is a person or entity that has control, joint control, or significant influence over the reporting entity, is a member of its key management personnel (or their close family), or is an entity that is part of the same group, an associate, a joint venture, a post-employment benefit plan for the entity's employees, or is otherwise controlled or jointly controlled by a person identified as a related party of the entity.
Who counts as key management personnel (KMP) under IND AS 24?
Key management personnel are the persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director (executive or non-executive) of that entity. This is a substance-based test focused on actual decision-making authority, not job title alone, and includes KMP of a parent entity where they also direct the reporting entity's activities.
Are two entities related merely because they share a common director?
Not automatically. Two entities are not related parties simply because they have a director or key manager in common, or because a key manager of one has significant influence over the other, unless the substance of the relationship otherwise meets one of IND AS 24's specific related party criteria (such as one entity actually controlling or significantly influencing the other). The standard requires assessing substance over legal form in every case.
What must be disclosed for related party transactions under IND AS 24?
For each category of related party, an entity discloses the amount of transactions, the amount of outstanding balances (including terms, security given/received, and details of any guarantees), provisions for doubtful debts related to those balances, and any expense recognised for bad or doubtful debts from related parties. Key management personnel compensation must be disclosed in total and by category (short-term, post-employment, other long-term, termination, and share-based payment benefits).
Does IND AS 24 require related party transactions to be at arm's length?
No. IND AS 24 is purely a disclosure standard — it does not require related party transactions to be priced at arm's length, nor does it prohibit non-arm's-length pricing. It only requires that the relationships, transactions and outstanding balances (including commitments) be disclosed, so that users can assess the possible effect of the relationship on the financial statements.
Is IND AS 24 the same as IAS 24?
IND AS 24 is India's converged version of IAS 24 and follows the same definitions of related party, key management personnel, and the government-related entities exemption. It replaces the older Indian AS 18, which had a narrower related party definition and did not include the exemption for entities related only through common government control.