New factsheet helps interpret accounting standards around related party transactions.
In the last couple of years some statutory financial statements have received criticism about the quality of their preparation.
The accountant’s role is a difficult balancing act, especially when it comes to the interpretation of accounting standards. UK GAAP is formulated (in line with International Accounting Standards) in a principle-based method, the standards provide the principles and the end user interprets and applies. This is a simplistic understanding but forms the basis of UK accounting standards.
To help with this interpretation ACCA is producing a series of accounting standard short factsheets that look at the more contentious issues and applications. This series of simple, easy to access, factsheets will cover the areas where accountants tend to have the most issues. The end result is a document which is easy to read and understand, user-friendly and provides all the information on the area that accountants need. The first factsheet covers Related Party Transactions.
There is a standard layout for each one, covering:
- introduction: a brief narrative covering each topical area
- legislative requirement: looking at the provisions with the Companies Act, Accounting Standards, SORPS and accounting regulations specific to the area with the aim to concentrate on the provisions for all companies but then to provide further guidance and example small, medium and large companies
- accounting standards: as per the above requirements
- example model disclosure: this is a key element of the factsheet covering the most common scenarios. This will just provide an extract from a set of financial statements showing how the disclosure will look covering:
- extract from primary statements where applicable
- accounting policy
- notes to the accounts
- disclosure checklist: this will be a list of items that need to be considered when addressing the particular issue in a tabulated format covering both the accounting and disclosure issues. The checklist compares various standards and can be used as a tool to improve your understanding and compliance, comparing:
- FRSSE 2008
- FRSSE 2015
- sources of information: a list of further reading (usually the legislation and standards) and links to where these can be obtained.
Finally there is a checklist that compares various standards and can be used as a tool to improve your understanding and compliance of the relevant accounting standard.
Download Factsheet 180 – Related Party Transactions now.
Article contributed by ACCA