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Accounting & Audit

Related Party Transactions

By August 23, 2015No Comments

Per FASB ASC 850, Related Party Disclosures, information about material transactions with related parties should be disclosed in the financial statements. A related party is defined as an entity that can control or significantly influence the management or operating policies of another entity to the extent one of the entities may be prevented from pursuing its own interests. A related party may be any party the entity deals with that can exercise that control. Examples of related parties are affiliates, key management, principal owners of the entity and members of their family, and other parties with significant influence.

Common related party transactions may include:

  • Sales, purchases, and transfers of property.
  • Services provided or received.
  • Property and equipment leases.
  • Loans or guarantees.
  • Maintenance of compensating bank balances for the benefit of a related party.
  • Allocations of common costs.
  • Filing consolidated tax returns.

FASB ASC 850-10-50, Related Party Disclosures, requires that financial statements include disclosures of material related party transactions. These disclosures should include:

  • The nature of the relationship involved.
  • A description of the transaction.
  • Dollar amounts of transactions.
  • Amounts due from or due to related parties as of the date of each balance sheet presented.

Additionally, the FASB issued an Accounting Standards Update, ASU 2013-06 Not-for-Profit Entities, which addresses revenue recognition guidance for contributed services from an affiliate. The amendments in this update are effective prospectively for the fiscal years beginning after June 15, 2014, and interim and annual periods thereafter.

Refer to the following link for more information:

http://www.fasb.org/jsp/FASB/Document_C/DocumentPagecid=1176162374871&acceptedDisclaimer=true

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