Exploring Corporate Governance Around the World

By Allison Garrett, Senior Vice President for Academic Affairs at Oklahoma Christian University

Wednesday, July 19, 2006

IASB to Address Related Party Disclosures

Yesterday, the IASB voted to take up the issue of related party disclosures by issuers. A copy of of the IASB's informational document is located here. The IASB will be looking specifically at disclosures by state-controlled entities and will continue its work with China's Ministry of Finance.

China has expressed concern about the possibility that the current exemption for disclosure of transactions between state-controlled entities will impact Chinese companies that are listed overseas and apply IFRS. The Ministry of Finance notes that as privitization occurs, any listing of related entities must be constantly updated.

Entities in other countries -- not just China -- have similar concerns. France, Russia and Eastern European countries also have state-controlled entities that face similar issues.

The IASB is considering alternatives to address these concerns. One possibility is wording such as that from the Chinese Accounting Standard noting that entities that are both controlled by the State shall not be regarded as related parties where other related party relationships do not exist.

No comments: