| Relevant Definitions |
| Relative/ Close member of a person’s family |
Relative – in relation to an individual, means the spouse, son, daughter, brother, sister, father and mother who may be expected to influence, or be influenced by, that individual in his/her dealings
with the reporting enterprise. |
Close members of the family 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 including:
(a) that person’s children, spouse or domestic partner, brother, sister, father and mother;
(b) children of that person’s spouse or domestic partner; and
(c) dependants of that person or that person’s spouse or domestic partner. |
Domestic partner is not defined. Further, children and dependants of person’s spouse or domestic partner are an addition to the list. |
| Key Management Personnel |
are those persons who have the authority and responsibility for planning, directing and controlling the activities of the reporting enterprise. |
are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director (whether executive or otherwise) of that entity.
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Key managerial personnel ‘KMP’ referred in IND-AS 24 is in plural so as to mean a body of individuals which is the Board of directors of the company. It is different from the term ‘Key Managerial Personnel’ referred in Companies Act, 2013.
This is evident from the definition of related party which inter-alia includes a person who is a member of the key management personnel of the entity (or of a parent of the entity).
Hence, every director of the company including the independent directors, would be covered under the definition and their names are required to be disclosed in the financial statements. |
| Control[2] |
(a) ownership, directly or indirectly, of more than one
half of the voting power of an enterprise, or
(b) control of the composition of the board of directors in thecase of a company or of the composition of the corresponding governing body in case of any other enterprise, or
(c) a substantial interest in voting power and the power to direct, by statute or agreement, the financial and/or operating policies of the enterprise |
IND-AS 110 provides for control as under:
6. An investor controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.
7. Thus, an investor controls an investee if and only if the investor has all the following:
(a) power over the investee;
(b) exposure, or rights, to variable returns from its involvement with the investee; and
(c) the ability to use its power over the investee to affect the amount of the investor’s returns. |
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| Joint Control |
The contractually agreed sharing of power to govern the financial and operating policies of an economic activity so as to obtain benefits from it. |
IND-AS 111 provides for Joint control as under:
Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. |
Power to govern has been substituted with control thereby widening the scope.
However, the joint control is not merely to govern to obtain benefits but unanimous consent for relevant activities. |
| Significant Influence |
Participation in the financial and/or operating policy decisions of an enterprise, but not control of those policies. |
IND-AS 28 defines significant influence as under:
Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control of those policies. |
Significant influence is neither control nor joint control. |
| Person as a related party |
| Person as a related party |
(c) individuals owning, directly or indirectly, an interest in the voting power of the reporting enterprise that gives them control or significant influence over the enterprise, and relatives of any such individual; |
(a) A person or a close member of that person’s family is related to a reporting entity if that person:
(i) has control or joint control of the reporting entity;
(ii) has significant influence over the reporting entity; or |
There is not much change except that close member of that person’s family may result in some inclusion. |
| Person as a related party |
(d) key management personnel and relatives of such personnel |
(a) A person or a close member of that person’s family is related to a reporting entity if that person:
(iii) is a member of the key management personnel of the reporting entity or of a parent of the reporting entity. |
KMP of parent entity and close member of that person’s family included under IND-AS 24 (similar to provision under Act, 2013 which includes KMPs of holding company and their relative).
However, definition of KMP under IND-AS includes all the directors of the company (executive or otherwise including IDs). |
| Entity as a related party |
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Enterprises that directly, or indirectly through one or more intermediaries, control, or are controlled by, or are under common control with, the reporting enterprise (this includes holding companies, subsidiaries and fellow subsidiaries); |
The entity and the reporting entity are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others). |
Group companies are an addition. |
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Associates and joint ventures of the reporting enterprise and the investing party or venturer in respect of which the reporting enterprise is an associate or a joint venture; |
One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member). |
Associate or JV of member of a group. |
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Enterprises over which any person described in (c) or (d) [refer (c) or (d) under persons] is able to exercise significant influence. This includes enterprises owned by directors or major shareholders of the reporting enterprise and enterprises that have a member of key management in common with the reporting enterprise. |
The entity is controlled or jointly controlled by a person identified in (a); or
A person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity). |
Similar provision. |
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No such provision |
Both entities are joint ventures of the same third party. |
If A ltd has JV1 (formed by A & B) and JV2 (formed by A & C) then JV 1 and JV2 are related parties. |
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No such provision |
One entity is a joint venture of a third entity and the other entity is an associate of the third entity. |
If A ltd has JV1 (formed by A & B) and A ltd holds 25% in Z Ltd then JV1 and Z Ltd are related parties. |
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No such provision |
The entity is a post-employment benefit plan for the benefit of employees of either the reporting entity or an entity related to the reporting entity.
If the reporting entity is itself such a plan, the sponsoring employers are also related to the reporting entity. |
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No such provision |
The entity, or any member of a group of which it is a part, provides key management personnel services to the reporting entity or to the parent of the reporting entity. |
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| Exclusions from the definition of related party |
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(a) two companies simply because they have a director in common, notwithstanding paragraph 3(d) or (e) above (unless the director is
able to affect the policies of both companies in their mutual
dealings); |
(a) two entities simply because they have a director or other member of key management personnel in common or because a member of key management personnel of one entity has significant influence over the other entity. |
Exclusion has been expanded to include directors and KMPs. |
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(b) a single customer, supplier, franchiser, distributor, or general agent with whom an enterprise transacts a significant volume of business
merely by virtue of the resulting economic dependence; |
(d) a customer, supplier, franchisor, distributor or general agent with whom an entity transacts a significant volume of business, simply by virtue of the resulting economic dependence. |
Similar exclusion. |
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(c) the parties listed below, in the course of their normal dealings with an enterprise by virtue only of those dealings (although they may
circumscribe the freedom of action of the enterprise or participate in its decision-making process):
(i) providers of finance;
(ii) trade unions;
(iii) public utilities;
(iv) government departments and government agencies including government sponsored bodies. |
(c) (i) providers of finance,
(ii) trade unions,
(iii) public utilities, and
(iv) departments and agencies of a government that does not control, jointly control or significantly influence the reporting entity simply by virtue of their normal dealings with an entity (even though they may affect the freedom of action of an entity or participate in its decision making process). |
Similar exclusion. |
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No such exclusion. |
(b) two joint venturers simply because they share joint control of a joint venture. |
While co-venturers are not expressly covered under the definition, it has been expressly excluded.
This is much needed exclusion as the venturers inter se should not be regarded as related party unless they fall meet any other parameter specified above. |
