Control and Related Party Notes

Control and Related Party Notes

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I am finalising the accounts for a client and I am in mixed minds as to the correct disclosure for the control and related party notes, the situation is as follows:

Mr & Mrs A - 30%

Son A - 15%

Mr B - 15%

Mr C - 20%

Mr D - 20%

Mr C and Mr D run the company on a day to day basis and draw a salary from the company. The main trade creditor of the company (both on purchases and rents) is own as follows:

Mr & Mrs A - 84%

Son A - 8%

Mr B - 8%

The company is small and accounts are being prepared under the FRSSE

What is the general opinion on disclosure on these terms?

Replies (6)

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By pawncob
22nd Feb 2011 16:25

Family Ties

Any relationship between A/B/C or D?

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By Applause
22nd Feb 2011 16:33

Family ties

No only Mr & Mrs A and Son A are related

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By Applause
22nd Feb 2011 16:40

Control and related party

I am leaning on the conclusion that the company is under the control "of the directors" with no overall controlling party and no disclosure is needed with the transactions with the creditor as under FRSSE 15.7 disclosure is not required "if transactions are simply as a result of their role as a supplier".

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Euan's picture
By Euan MacLennan
22nd Feb 2011 17:09

No overall control

Even if Son A is likely to be influenced by his parents and therefore be included as their close family, their combined 45% does not give them control.  Unless B, C or D happens to live in their household, no-one is the controlling party and no disclosure is required, not even a negative one.

However, I think you are misleading yourself about related party disclosure.  It is not required of transactions with parties "simply as a result of their role as a customer, supplier,...", but Mr & Mrs A are presumably directors and are certainly investors with significant influence, as are Mr C & Mr D, so they are related parties for reasons other than being mere suppliers.  If Son A is likely to be influenced by his parents, he is also a related party, even if not a director.  Mr B would probably only be a related party if he is a director.  As it says in para.15 of the FRSSE, disclosure is required of the amount and nature of the transactions and the balances outstanding at the end of the year for all related parties.

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By Applause
22nd Feb 2011 17:15

control and related parties

Thanks for your reply, yes all shareholders are also directors and there are no other shareholder/directors than those mentioned.

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By Applause
23rd Feb 2011 16:41

abbreviated accounts

Am I correct in the assumption that the transactions with Mr & Mrs A's company would only need to be disclosed in the full accounts and not the abbreviated accounts?

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