What Is IAS 24? Related Party Disclosures Explained

IAS 24 is the standard that makes the family visible: it requires the financial statements to disclose the entity's relationships with related parties and the transactions and balances between them — because a sale to the chairman's other company, a loan from the parent, or the CEO's compensation are not ordinary market events, and users of the accounts need to see them separately. The standard's premise is that related-party transactions may be priced, timed, or structured differently from arm's-length deals — the disclosure lets users judge the effect.

The related-party net is wide by design: parent entities and subsidiaries (the group), associates and joint ventures (significant influence/joint control), key management personnel (those with authority for planning, directing, and controlling — directors and senior executives) and their close family members, entities controlled or significantly influenced by any of those persons, and post-employment benefit plans. The definition captures influence, not just ownership — the 20%-held associate and the CEO's brother's company are both inside it.

The disclosures: the nature of the related-party relationships (even where no transactions occurred — the parent-subsidiary relationship is disclosed regardless), the transaction amounts (sales, purchases, loans, guarantees, management charges), outstanding balances including terms and security, provisions against related-party balances, and key management personnel compensation in total and by category (short-term benefits, post-employment, termination, share-based). The standard also offers the partial exemption for government-related entities (disclosing only individually/collectively significant transactions with the government and its entities) — relevant in the Gulf.

Identification — the first audit challenge: management must map the related-party universe — the group structure, the KMP and their families' interests, the entities they control. The auditor independently corroborates: shareholder registers, directorship searches, the prior year's file, bank transactions with unfamiliar counterparties, legal confirmations. Undisclosed related parties are among the most common financial-reporting findings — the map is always incomplete on the first draft, and the auditor's procedures exist to complete it.

Measurement and terms: IAS 24 does not require related-party transactions to be at arm's length — but it requires disclosure sufficient for users to understand their effect, including the terms (pricing basis, credit terms, security). Where transactions are not at arm's length, the substance-over-form question arises: the AED 10M 'sale' to the brother's company at twice the market price may be a distribution in substance — the accounting follows the economics, and IAS 24 ensures the disclosure follows the transaction.

The KMP compensation disclosure: total compensation and the category breakdown — the figure the market, the press, and the governance watchdogs read first. It includes all forms: salaries, bonuses, post-employment benefits, termination payments, share-based payments. The disclosure is aggregate (not per-person, though governance codes may require more), and its completeness is a standard audit focus — the bonus paid through the other group company, the car and housing benefits, the consultancy fees to the director's firm.

Government-related exemption: entities controlled or significantly influenced by a government may use the partial exemption — disclosing the government's identity and the nature of significant transactions/balances, without the full transaction-by-transaction detail. In the UAE's economy (GREs, sovereign-linked entities), this exemption is frequently relevant — but it is partial, not a pass: significant transactions are still disclosed, and the auditor tests the significance judgments.

The UAE is IAS 24's natural habitat: family groups (the chairman's companies transacting with each other), government-related entities (the GRE ecosystem), and concentrated ownership structures make related-party transactions the norm rather than the exception. UAE financial statements are typically dense with IAS 24 disclosures — the related-party notes of a family conglomerate run to pages: intercompany loans, management charges, shared services, guarantees, property leased between group entities, and the KMP compensation of the family executives.

Audit focus in the UAE: related-party completeness is the perennial risk — the undisclosed entity controlled by the director's relative, the transaction routed through an intermediary, the 'consultancy' that is really a distribution. Auditors apply the full ISA 550 (Related Parties) toolkit: directorship searches, transaction scanning, management enquiries with corroboration, and professional scepticism toward round-number, period-end, and off-market transactions with unfamiliar counterparties. The FTA reads these notes too — related-party transactions are the transfer-pricing population, and the IAS 24 disclosures map the terrain the transfer-pricing documentation must defend.

Governance overlay: UAE listed companies (SCA governance rules) and DIFC/ADGM entities face related-party transaction approval and disclosure requirements beyond IAS 24 — board/audit-committee approvals, shareholder approvals for material RPTs, and market disclosures. The accounting disclosure (IAS 24) and the governance process (approvals, announcements) are parallel tracks — the company needs both, and the auditor checks the accounting while the governance runs its own course. Family groups formalising governance (the current regional trend) find IAS 24 compliance improving as the related-party map becomes a managed register rather than an archaeological exercise.

Desert Holdings Group — 2026 IAS 24 note (condensed):

• Relationships: Parent (Desert Holdings PJSC); subsidiaries (12, listed); associate (Oasis Logistics, 30%); joint venture (Gulf Warehousing, 50%); KMP (7 executive directors/officers); the chairman's private company (Falcon Investments — controlled by KMP's close family member)
• Transactions: sales to Oasis Logistics AED 18M (at cost-plus 5% — documented as arm's length); management charges from parent AED 6M; loan to Gulf Warehousing AED 25M (interest-free, repayable on demand — terms disclosed, the interest-free element noted); purchases from Falcon Investments AED 9M (office fit-out — benchmarked against two independent quotes, the benchmarking disclosed); guarantees of subsidiaries' borrowings AED 120M (disclosed by amount)
• Balances: receivable from Oasis AED 4M (30-day terms, unsecured); loan to Gulf Warehousing AED 25M outstanding (no provision — recoverability assessed); payable to Falcon AED 1.5M
• KMP compensation: AED 14M total (short-term benefits AED 11M, post-employment AED 1.5M, share-based AED 1.5M) — including the family executives' packages
• The audit: the auditor's directorship search finds an additional entity (the CEO's spouse's consultancy, paid AED 1.2M) — initially undisclosed; management adds it with the amounts and terms; the auditor benchmarks the fees (2× market — the excess accrued as a distribution-like charge with disclosure); the completeness procedure that earned its keep
• Government-related angle: the group's 15% shareholder is a sovereign fund — the partial exemption considered but not taken (the group discloses fully; the exemption's significance judgments deemed more work than full disclosure)

The worked example's lesson: the IAS 24 note is a transparency document that writes itself from a well-kept related-party register — and an archaeological dig without one. The auditor's undisclosed-party finding (the spouse's consultancy) is the standard's purpose made concrete: the transaction the statements would otherwise have hidden, now disclosed with its off-market pricing visible. The register, maintained continuously, is the entire difference.

Incomplete related-party mapping is the universal failure — the note discloses the obvious (parent, subsidiaries) and misses the subtle (the KMP's family entities, the de-facto controlled company). Maintain the register continuously (directorships, shareholdings, family interests declared annually); the year-end scramble always misses something.

Second, terms omitted. Disclosing the AED 25M loan without its interest-free, on-demand terms hides the economics — IAS 24 requires the terms that let users understand the effect. The interest-free loan's benefit is part of the story.

Third, KMP compensation incompleteness. The salary disclosed but the housing, car, school fees, and the consultancy paid to the director's firm missed — KMP pay is all forms, all sources. The governance press reads this note; incompleteness becomes the story.

Fourth, confusing IAS 24 with transfer pricing. The accounting disclosure (what happened, on what terms) and the tax arm's-length test (whether the pricing survives) are different exercises — the IAS 24 note maps the population; the transfer-pricing documentation defends it. Do both; neither substitutes.

Fifth, the government-exemption overreach. The partial exemption for government-related entities is not a blanket pass — significant transactions are still disclosed, and the significance judgments need defending. The GRE that discloses nothing on exemption grounds invites the auditor's (and the regulator's) challenge.

Transfer pricing defends the pricing. Beneficial ownership maps the control. Consolidation eliminates the intra-group. Audit committee oversees the transactions. ISA 550 is the audit standard. And fair value is the pricing benchmark.