Related Party Disclosures require adequate disclosure in the financial statements of transactions between the entity and individuals/ businesses to whom it is related. 

i) Mr. Bulldog owns all of the issued share capital of Terrier plc. During the year Mr. Bulldog purchased goods and services from Terrier at normal market terms. Payment for the goods was made in full before the year-end. 

ii) Terrier plc owns 30% of the shares in a bank, Pinscher plc. At the end of the year, Pinscher loaned £2 million to Terrier. The loan is for 2 years and is interest-free. 

iii) Mr. Bulldog’s wife, Mrs. Bulldog, is a senior director of Ridgeback Ltd. During the year Ridgeback sold goods to Terrier. The transaction was at a 50% discount. The balance is still outstanding at the year-end. 

Required: 

a) Discuss the related party disclosures required in the financial statements of Terrier plc only.

b) Explain (< 250 words) why such disclosures are important to the user of financial statements.

Answer rating: 100% (QA)

ANSWER A Before aggregating the reporting entity should consider whether disclosure of the name of a ... View the full answer