FRSSE - disclosure of trans with Related Parties

FRSSE - disclosure of trans with Related Parties

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I am preparing statutory accounts for a UK company which comply with FRSSE as at Jan 2007. The company is 100% owned by an Isle of Man registered company, which provides management services. It also receives services from another stand alone IoM company which has the same shareholders as those of the parent of my client. The client company has no staff & all sales, marketing, admin functions are provided by these 2 companies. The directors maintain that the services provided are charged on an arms length basis, but there may be room for some argument about that if challengedby HMRC.

Obviously, the transactions & balances with the parent will have to reported as a Note to the accounts, and I had assumed that those with the stand alone IoM co are similarly caught by the disclosure provisions, but the client is objecting strongly & asking for definitive evidence of what is required. Can anyone help by pointing me to the requisite definitive disclosure rules as now applying. Many thanks, MR
Miles Robinson

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By AnonymousUser
28th Aug 2008 11:27

Thanks!
Thanks vm Euan. I couldn't find the FRSSE doc (have now) & the client was giving me grief. It's quite lonely being a sole practitioners sometimes!
Regards, Miles

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Euan's picture
By Euan MacLennan
28th Aug 2008 10:07

FRSSE
Forgive me for stating the obvious, but look at the FRSSE to find out the disclosure rules.

The 3 companies are clearly related parties because they are under common control. Section 15.1 says:

"Where the reporting entity ... (b) renders or receives services ... to, from or on behalf of a related party, then such material transactions shall be disclosed ..."

There would appear to be no doubt that the transactions are material to the client company.

The only possible get out is section 15.7:

"Disclosure, as a related party transaction, is not required of (c) transactions with the parties listed below simply as a result of their role as (iv) a customer, supplier, franchiser, distributor or general agent."

I think this could only possibly apply where the standalone IoM company is providing similar services to lots of other companies apart from your client.

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