IAS 24 — Types of Related Parties: Mapping the Full Definition
Learn how IAS 24 identifies related parties through five practical categories, common exclusions, GCC-specific risks, and a worked group example.
A company's single largest customer accounts for 60% of its revenue. Is that customer a related party? Most people instinctively say yes — surely that level of dependence counts for something. IAS 24 says no, and getting this definition wrong in either direction — over-identifying or under-identifying — is one of the most common governance and audit findings in family-controlled GCC groups.
Watch the Lesson
Types of Related Parties — Mapping the Full Definition
Taught by Dr. Hesham Mokhiemer
This is a free preview lesson from the IAS 24 module inside DipIFR Masterclass and the IFRS CERT Course. Watch the full clip above, then read the companion notes below — this is exactly the depth and teaching style you get across all 30+ IFRS standards in the full programme.
Why Related Party Identification Matters
IAS 24.9 contains one of the densest definitions in all of IFRS — packed with sub-clauses covering control, significant influence, key management personnel, and family relationships. Rather than working through it clause by clause, this lesson organises the definition into five clear categories that are far easier to apply in practice.
Five Categories of Related Parties — IAS 24.9
Entities With Control, Joint Control, or Significant Influence
Parent companies, subsidiaries, fellow subsidiaries within the same group, associates, and joint ventures. This is the most intuitive category — ownership and group structure relationships.
Key Management Personnel (KMP)
Individuals with authority and responsibility for planning, directing, and controlling the entity's activities — typically executive directors and senior management. Critically, this includes KMP of the reporting entity's PARENT as well, not just the entity itself.
Close Family Members
Close family members of anyone in Category 1 or 2 — defined as family members who may be expected to influence, or be influenced by, that person. This typically includes the person's spouse/domestic partner, children, and dependents.
Post-Employment Benefit Plans
Pension funds, EOSB-related trusts, or similar plans established for the benefit of employees of the reporting entity or a related entity.
Entities Controlled by Related Persons
If anyone identified in Category 2 or 3 controls or jointly controls a separate entity, that entity also becomes related to the reporting entity — even with no other direct connection.
What Does NOT Make Parties Related — IAS 24.11
This is just as important as knowing what DOES create a related party relationship — and it's where most over-identification errors happen:
- Two entities simply because they share a director or key manager in common — unless that person also has control or significant influence
- Two venturers simply because they share joint control over the same joint venture
- Finance providers, trade unions, public utilities, and government departments — purely through normal dealings, even if those dealings affect the entity's freedom of action
- A customer, supplier, or distributor an entity does significant business with — economic dependence ALONE never creates a related party relationship
Why This Matters Even More in the GCC
Related party identification carries particular weight in Saudi and GCC markets. Many listed and private groups are family-controlled conglomerates with complex webs of cross-holdings, family members in governance roles, and intercompany trading. For Tadawul-listed entities specifically, the Capital Market Authority's Corporate Governance Regulations impose board approval and disclosure requirements on material related party transactions — getting the IAS 24 identification right is the foundation that determines which transactions even fall within those governance requirements in the first place.
Common Identification Traps
Assuming a major customer or supplier is automatically related
Economic dependence — even a customer representing the majority of revenue — does NOT by itself create a related party relationship. There must be an actual ownership, control, influence, or family connection.
Assuming family members need an active role in the business to count
A close family member of a controlling shareholder or key manager is a related party regardless of whether that family member has ANY involvement in the business — the relationship test is about the family connection, not their participation.
Forgetting key management personnel of the PARENT company
KMP of a parent entity are related parties of every subsidiary in the group, not just the entity they're formally employed by. This is frequently missed in multi-tier group structures.
Worked Example — Al-Manara Group
Al-Manara Holding Co. is the reporting entity. Classify each of the following:
| Party | Connection | Related Party? | Why |
|---|---|---|---|
| Al-Manara Trading Co. | 100%-owned subsidiary | Yes | Same group — Category 1 |
| Al-Manara Logistics | 35%-owned associate | Yes | Significant influence — Category 1 |
| Sheikh Abdullah Al-Manara | Chairman, majority shareholder | Yes | Control — Category 1 |
| Sheikh Abdullah's son (no role in the company) | Close family member | Yes | Family member of controlling person — Category 3 |
| Largest raw material supplier (60% of purchases) | Significant trading volume, no ownership link | No | Economic dependence alone is excluded — IAS 24.11(d) |
| Group CFO | Key management personnel | Yes | KMP — Category 2 |
| CFO's spouse (runs an unconnected small business) | Close family member of KMP | Yes | Family member of KMP — Category 3, regardless of the spouse's own business |
| Bank with a board-nominated non-executive director on Al-Manara's board, no other connection | Shared director only | Requires analysis | A shared director alone doesn't establish relation — IAS 24.11(a) — unless that person also has significant influence |
Related Party Transactions & Disclosure Requirements
Continue Your IFRS Journey
This lesson is one part of a structured, 30+ standard IFRS curriculum. If the teaching style and depth here is what you're looking for, here's where to go next:
DipIFR Masterclass
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IFRS CERT Course
A practitioner-focused IFRS certification for finance professionals applying these standards in real GCC company accounts — not exam-focused, job-focused.
- GCC case studies in every module
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Frequently Asked Questions
If a family member of our controlling shareholder has absolutely no involvement in the business, do we still need to track potential transactions with them?
Yes — the related party STATUS exists purely because of the family relationship to someone with control, regardless of that family member's own involvement (or lack of it) in the business. What changes based on involvement is the likelihood of actual transactions occurring, not whether the disclosure obligation framework applies to them if a transaction does occur.
Does a long-standing, high-volume relationship with a single supplier ever become a related party relationship purely through that economic dependence?
No — IAS 24.11(d) is explicit and deliberate on this point. No matter how large the volume of business or how dependent the entity becomes on that single supplier or customer, economic dependence by itself never creates a related party relationship. There would need to be an actual ownership stake, control, significant influence, or family/KMP connection layered on top of the trading relationship for related party status to apply.
Does this module cover what actually has to be disclosed once a related party is identified?
Disclosure requirements — including the nature of relationships, the specific information required for related party transactions (amounts, outstanding balances, terms and conditions, guarantees), and the simplified disclosure exemptions available for government-related entities — are covered in Part 2 of this module, which follows directly from the identification principles covered here.
Dr. Hesham Mokhiemer
Global Distinguished Trainer · IFRS Expert · Founder, The Financeer AcademyDr. Hesham Mokhiemer has trained over 18,000 finance professionals across Saudi Arabia, UAE, Kuwait, Bahrain, and Egypt in IFRS, Power BI, and financial reporting. He is the founder of The Financeer Academy and the creator of the DipIFR Masterclass and CertIFR preparation courses.
