Introduction:
IAS 24 – Related Party Disclosures requires companies to disclose transactions and arrangements with related parties to ensure transparency and enable users of the financial statements to assess the effects of these transactions on the company’s financial position and performance. The related parties in this case include the company’s management board members, such as executive and non-executive directors, and those with special relationships, such as bondholders with convertible features.

1. Remuneration Disclosure for Directors (IAS 24):
According to IAS 24, remuneration of key management personnel (which includes both executive and non-executive directors) must be disclosed. However, IAS 24 provides flexibility on how much detail should be provided, but it requires sufficient information to allow users to understand the compensation arrangements and any potential conflicts of interest.

• Key Management Personnel: In the case of IBRO Plc, the management board, including both executive and non-executive directors, falls under key management personnel.
• Disclosures Required:
  • Total remuneration paid to key management personnel (including both executive and non-executive directors).
  • The compensation types, such as salary, bonus, loans, and convertible bond holdings, must be disclosed to indicate how key management is remunerated and how these arrangements might impact the company’s financial performance.
• Loan and Convertible Bonds: The loans granted at concessional rates to four directors and the bondholder relationship with convertible features must also be disclosed, as these are related party transactions. The terms of these transactions, such as interest rates and convertible terms, should be specified.

2. Non-Executive Directors and Their Remuneration:
Although IBRO Plc has disclosed the total remuneration paid to directors, it has failed to include the non-executive directors in the key management disclosures. This omission is inconsistent with the requirements of IAS 24, which states that the remuneration of all key management personnel should be disclosed.

• Non-Executive Directors: These directors should also be included in the key management disclosure for their remuneration, as they are part of the company’s governance and decision-making processes. This disclosure should include all forms of compensation they receive, including salary, bonuses, and any non-cash compensation (such as loans).

3. Ambiguous Disclosure Proposal:
IBRO Plc’s CFO proposes disclosing the related party information in an ambiguous manner to prevent users from identifying the remuneration of individual directors. However, this is not compliant with IAS 24, which requires transparency in related party disclosures. The purpose of the disclosure is to provide sufficient details for users to assess the potential impact of related party transactions on the company’s financial statements.

• Transparency and Accountability: The company must provide clear and transparent information to allow users of the financial statements to assess the nature and extent of these related party transactions. This includes a detailed breakdown of the remuneration packages for each director, if material.
• Guidance in IAS 24: While the names of individual directors do not need to be disclosed, the aggregate amounts of compensation provided to key management personnel, including the breakdown by type of compensation (such as salary, bonus, loan, and other benefits), should be disclosed. This will ensure compliance with IAS 24’s transparency requirements while protecting individual privacy.

4. Conclusion and Recommendations:
IBRO Plc must ensure compliance with IAS 24 by making the following disclosures:

• Detailed Remuneration: The total remuneration of both executive and non-executive directors must be disclosed, including salary, bonus, loan arrangements, and any convertible bond holdings.
• Related Party Transactions: The terms of the loans to directors at concessional rates and the convertible bond features held by directors must be fully disclosed, specifying interest rates, repayment terms, and the potential impact of these transactions on the company.
• Key Management Disclosure: Both executive and non-executive directors must be included in the key management remuneration disclosures, as they are part of the company’s decision-making process.

This level of detail ensures that users of the financial statements, including investors, creditors, and other stakeholders, have access to the necessary information to assess the potential risks and rewards associated with the company’s governance, executive compensation, and related party transactions.