disclosure of related party transactions

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varun mahajan (Querist)
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19 October 2007 querry:1) if the assessee co. has received loan from the companies under same management what should be the disclosure of the same in notes to accounts
2) if i use the premises of the co. under same management and pay rent to them then is it considered a related party transaction and how should be its disclosure

R.V.RAO

R.V.RAO (Expert)
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20 October 2007 AS 18 ADVISES ALL RELATED PARTY TRANSACTIONS TO BE DISCLOSED WHEN THE DIRECTORS OR THEIR RELATIVES OR KEY MANAGERIAL PERSONNEL/THEIR RELATIVES ENTER SUCH TRANSACTIONS (INCLUDING SALARIES,RENTING, CONTRACTING ETC...), THE SAME NEEDS DISCLOSURE.
BOTH THE ABOVE CASES STATED BY YOU NEED DISCLOSURES.
THIS IS BECAUSE MONEY RELATED TRANSACTIONS OF COMMON DIRECTORS( NOT SIMPLY ONE ,BUT MORE THAN ONE) IN COMPANIES AND KEY PERSONS/RELATIVES / DIRECTORS AND RELATIVES AND COMPANIES UNDER COMMON MANAGEMENT ETC.. NEED TO MEET DISCLOSURE NORMS .
AS 18 STATES THE FOLLOWING AS NOT RELATED PARTIES(UNRELATED PARTIES)
1.NON EXEC. DIRECTOR SIMPLY BY VIRTUE OF DIRECTOR SHIP
2.CUSTOMER,SUPPLIER,FRANCHISER,DISTRIBUTOR,OR GENARAL AGENT WHO ENTERS INTO DEALINGS WITH THE REPORTED ENTERPRISE BY vIRTUE OF ECONOMIC INDEPENDENCE.
3.TWO COMPANIES WHO HAVE SIMPLY A COMMON DIRECTOR
4.PROVIDER OF FINANCE,TRADE UNIONS,PUBLIC UTILITIES AND GOVT. DEPTS.ALTHOUGH THEY MAY CIRCUMSCRIBE THE FREEDOM OF ACTION OF THE ENTERPRISE OR PARTICIPATE IN ITS DECISION MAKING PROCESS.
SO WHATEVER IS NOT STATED IN THE ABOVE NEGATIVE LIST NEEDS DISCLOSURE.
R.V.RAO

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