Transactions of 90 lakhs happened between Narmada Ltd. and Ganga Ltd. The transaction is a related party transaction which requires disclosure. Conclusion: The view of the chief accountant is not in line with AS-18. The transactions must be disclosed even if the transactions are at normal market prices. Question 3 P Ltd. has 60% voting right in Q Ltd. Q Ltd. has 20% voting right in R Ltd.  Also, P Ltd. directly enjoys voting right of 14% in R Ltd. R Ltd. is a listed company and regularly supplies goods to P Ltd. The management of R Ltd. has not disclosed its relationship with P Ltd. How would you assess the situation from the viewpoint of AS 18 on Related Party Disclosures? Solution A company has significant influence over another company if it enjoys at least 20% of voting rights. Since P Ltd enjoys voting right of 34% [14% directly and 20% thorough Q Ltd] in R Ltd, it exercises significant influence over R Ltd. As per AS-18 two parties are considered to be related if one exercises significant influence over the other. Hence a related party relationship exists between P & R According to the disclosure requirements of AS-18, R Ltd. should disclose the relationship with P Ltd in its financial statements. The transactions with P Ltd. should also be disclosed.
You've reached the end of your free preview.
Want to read all 3 pages?
- Spring '20
- Democracy, Accountant, Husband, managing director