Accounting Standards Board

ASB publishes Amendment to Financial Reporting Standard 8 'Related Party Disclosures'

ASB PN 336

08 December 2008

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	Amendment to FRS 8 'Related Party Disclosures'


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The Accounting Standards Board (ASB) has today issued an Amendment to Financial Reporting Standard (FRS) 8 ‘Related Party Disclosures’. The Amendment reflects changes to the law introduced by ‘The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008’ (the Regulations).

In particular, the Amendment:

changes the definition of ‘related party’ in FRS 8 to be the same as that in the law; and
provides an exemption only for transactions entered into between two or more members of a group, provided that any subsidiary undertaking which is a party to the transaction is wholly-owned by such a member. This is a change from FRS 8, which provided a scope exclusion for 90 per cent subsidiaries.

The Regulations include a requirement for particulars to be given in the notes to the accounts of transactions which an entity has entered into with a related party, where such transactions are material and have not been concluded under normal market conditions. The Amendment clarifies that this requirement will be met by complying with FRS 8, which requires disclosure of all material related party transactions.

The ASB consulted on the definition of related party in both Financial Reporting Exposure Draft (FRED) 25 (in May 2002) and FRED 41 (in July 2007), and considers that, in light of this consultation and the fact that constituents were supportive of the proposal, a further exposure period is not necessary for this Amendment.

The Amendment is effective for accounting periods beginning on or after 6 April 2008.

Notes to Editors

‘The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008’ (the Regulations) (Statutory Instrument, SI 2008/410) introduce into UK law the provisions of European Directive 2006/46/EC on related party transactions.
The Amendment is designed to align FRS 8 with the Regulations, in particular with regard to the definition of ‘related party’. The Regulations require that ‘related party’ has the same meaning as in international accounting standards. The version of IAS 24 ‘Related Party Disclosures’ that has been adopted for use in the EU is that published by the International Accounting Standards Board (IASB) in December 2003 (adopted for use in the EU in December 2004). The definition of related party contained in this version of IAS 24 is the one used in the Amendment to FRS 8.
The ASB is an operating body of the Financial Reporting Council (FRC), the UK’s independent regulator responsible for promoting confidence in corporate reporting and governance. Its functions are exercised principally by its operating bodies (the Accounting Standards Board, the Auditing Practices Board, the Board for Actuarial Standards, the Financial Reporting Review Panel, the Professional Oversight Board and the Accountancy and Actuarial Discipline Board) and by the FRC Board. The Committee on Corporate Governance assists the Board in its work on corporate governance.
The main role of the ASB is to contribute to the establishment and improvement of standards for financial reporting. The ASB collaborates with accounting standard-setters from other countries and the International Accounting Standards Board (IASB) both in order to influence the development of international standards and in order to ensure that its standards are developed with due regard to international developments.
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The Amendment can be downloaded, free of charge, from the FRC website at http://www.frc.org.uk/asb/publications/documents.cfm?cat=1. Hard copies of the Amendment can be obtained at a cost of £3.00, post-free, from FRC Publications, 145 London Road, Kingston upon Thames, Surrey KT2 6SR (020 8247 1264). Web: www.frcpublications.com.
Press enquiries should be addressed to Ian Mackintosh (Chairman) on 020 7492 2434, David Loweth (Technical Director) on 020 7492 2420, or Jennifer Guest (Project Director) on 020 7492 2427.