- 7 Marks
CR – May 2016 – L3 – Q7a – Related Party Disclosures (IAS 24)
Discuss the appropriate disclosure of related party transactions and director remuneration under IAS 24 for IBRO Plc.
Question
a) IBRO Plc provided the remuneration of its management board made up of executive and non-executive directors (including 2 foreign nationals) as follows:
- Annual basic salary
- Bonus scheme (Annual compensation)
Four of the directors of IBRO Plc obtained loans from the company at concessional rates, while 2 directors are part of the bondholders of the company’s loan stock with convertible features to their advantage.
In the group financial statements, with the related parties note under IAS 24 – Related Party Disclosures, IBRO Plc disclosed the total remuneration paid to directors and non-executive directors. No further breakdown of the remuneration was provided. The remuneration of the non-executive directors, however, was not included in the key management disclosures.
IBRO Plc was of the opinion that in its jurisdiction, providing information about individual director’s remunerations would be a disservice to them, especially because they have served the company meritoriously. Consequently, the CFO of the company is proposing to disclose the related party information in the annual financial statements in an ambiguous manner to prevent users of the financial statements from linking remuneration information to specific individual directors.
Required:
Discuss the appropriate disclosure for the above transactions within the context of IAS 24 – Related Party Disclosures in the financial statements of IBRO Plc for the year ended December 31, 2014.
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