UMASHANKAR (MANAGER-ACCOUNTS & FINANCE) (62 Points)
19 January 2013Hi friends
Pls guide me about Accounting Standards AS-18 of Related Parties.
Director of the Company has given a loan of Rs. 1 Lac to the Pvt. Ltd. company, whether this loan of the director will be disclosed under Related Party.
Pls confirm your better understanding
Giridhar S Karandikar
(Team Lead)
(7543 Points)
Replied 20 January 2013
for the purpose of applying the provision of AS-18 the essential element is control by one party over the other party. so in this case it shud be assessed that whether the director who has given a Loan has a substantial interest in the other company, or if he is able to manage the composition of the Board of the other company or he has more than half of the voting power. If one of the conditions is satisfied then it can be ssaid theat related party transaction exists.
Just giving a loan by a director to someone would not attract AS-18, the eseential elemt is control as explained above. Accordingly necessary disclosure shud be made in the Notes to Accounts.
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