Understanding related party transactions is crucial for ensuring transparency and compliance in financial reporting. This course is designed to provide a comprehensive overview of related party transactions, focusing on the disclosure requirements under IAS 24, as well as key regulations from the Indian Companies Act and SEBI’s Clause 49. Participants will learn how to recognize related parties, manage related party transactions, and understand the role of auditors and compliance committees in maintaining proper governance. Through case studies and practical examples, students will gain hands-on experience in applying these concepts to real-world scenarios.
Section 1: Introduction
The course begins by introducing the concept of related parties and their relevance in financial reporting. Students will gain an understanding of how related party transactions can influence business decisions, financial disclosures, and governance. This section sets the foundation for further exploration into the regulatory frameworks that govern these transactions.
Section 2: Meaning of Related Parties
In this section, students explore the definitions and criteria used to identify related parties. They will learn about the various categories of related parties, including individuals and entities, and how these relationships are determined. The section also covers the importance of identifying related parties accurately to ensure compliance with accounting standards and regulations.
Section 3: Related Transactions
This section delves into the specifics of related party transactions, focusing on what constitutes such transactions and what exclusions may apply. Students will study the provisions of IAS 24 and gain insights into how related party transactions are handled in financial statements. Practical examples are provided to illustrate the correct accounting treatment and disclosure of these transactions in compliance with IAS 24.
Section 4: IAS 24 Disclosures
Building on the understanding of related party transactions, this section focuses on the detailed disclosure requirements set out by IAS 24. Students will learn how to prepare and present disclosures, ensuring transparency and compliance. The section includes practical exercises to apply the IAS 24 disclosure requirements to various scenarios, helping students gain confidence in handling related party disclosures.
Section 5: Arm’s Length Transactions
The concept of arm’s length transactions is crucial in determining whether related party transactions have been conducted on fair terms. In this section, students will learn what arm’s length pricing means and how it is applied in financial reporting. Case studies and examples are used to demonstrate the implications of pricing arrangements between related parties, with a focus on ensuring that these transactions reflect market conditions.
Section 6: Role of Audit Committee
This section explores the role of the audit committee in monitoring and reviewing related party transactions. Participants will learn about the responsibilities of the audit committee in ensuring the integrity of financial reporting and compliance with governance standards. The section also covers the audit committee’s role in approving related party transactions and ensuring they are conducted in the best interests of the company and its stakeholders.
Section 7: Companies Act
In this section, the course shifts its focus to the Indian regulatory framework, particularly the Companies Act 2013. Students will explore the key provisions of the Act that govern related party transactions, along with SEBI’s Clause 49. This section emphasizes the practical implications of these regulations for companies operating in India, with discussions on compliance strategies and key considerations for private companies.
Section 8: Case Studies – Wipro and HUL
To bring all the theoretical concepts together, this section presents case studies of two major Indian corporations: Wipro and Hindustan Unilever (HUL). By analyzing the related party transactions of these companies, students will see how the principles of IAS 24 and the Indian Companies Act are applied in real-world situations. The case studies will also highlight the challenges and considerations involved in managing related party transactions within large corporations.
Conclusion:
By the end of the course, participants will have a strong understanding of related party transactions, their impact on financial reporting, and the regulations that govern them. They will be equipped to identify related parties, manage transactions appropriately, and ensure compliance with both international and local standards. The knowledge gained in this course will help finance professionals, auditors, and compliance officers enhance transparency and governance in their organizations.