The relationship changes the questions
IAS 24 is aimed at disclosing the possible influence of related parties on financial position and performance. Its official overview defines a transaction as a transfer of resources, services or obligations, regardless of whether a price is charged. Source: **curr-stat-ias24**, About. No payment therefore does not mean no transaction worth examining. Relatedness must be established under applicable definitions, not by similar company names.
A fictional sales concentration
A manufacturer has annual revenue of 800, of which 240 comes from a related customer. The share is 240 / 800 = 30%. At period end, receivables from that customer are 120. Comparing the balance with annual purchases gives 50%, but this is not an exact payment period: the balance may result from one large seasonal delivery or special contractual terms.
If the customer stops buying, it cannot automatically be assumed that an external market will absorb the same volume at the same price. Conversely, dependence does not guarantee a loss: the relationship may be a stable part of the business model. A fair conclusion states the scale of dependence, the terms and the available evidence rather than calling all revenue fictitious or risk-free.
Study turnover and balances separately
Large transactions during the year may have been fully paid while a small sale at year end created a large balance. In addition to ordinary receivables, examine guarantees, financing provided and commitments for future transactions. IAS 24 provides for disclosure of the relationship’s nature and information about transactions and outstanding balances, including commitments. Source: **curr-stat-ias24**, About, disclosure requirements.
For a loan, examine maturity, contractual rate, security and demand terms. Do not call it equity merely because the lender is an owner. IAS 32 links classification to the contractual substance of obligations and contains exceptions. Source: **curr-stat-ias32**, About. A participant’s goodwill and an actual obligation are different questions.
Within the group and outside consolidation
A transaction between members of one consolidated perimeter and a transaction with another related organisation can affect presented results differently. IFRS 10 describes consolidation as presenting a group as a single economic entity. Source: **curr-stat-ifrs10**, About. The related-party population is wider than everyday notions of subsidiaries, so not every related-party turnover is automatically eliminated from every form.
A common error is calling terms arm’s length without checking. That conclusion needs comparability evidence, not merely the absence of an obvious conflict. Another error is treating guarantees as immaterial because no cash has yet moved. They may create dependence on future resources, although the specific accounting status must be determined under applicable rules.
A working dependency map
Build a table with party, relationship, transaction type, turnover, balance, terms, security and place in the perimeter. Mark what is known and what is not disclosed. Do not calculate exact “normalised” profit when there is no demonstrable market replacement condition.
This material does not assess the legality of a specific transaction or establish a conflict of interest. Continue with [the balance sheet](/guides/balance-sheet/), [fundamental analysis](/guides/fundamental-analysis/) and [peer comparison](/guides/peer-comparison/).
Check what changes if the relationship disappears
For a significant transaction, ask a counterfactual question: could the company obtain a similar product, financing or customer on other terms? The answer is often unknown, but the question reveals dependence. Do not immediately calculate alternative profit; without comparable offers, a precise percentage is guesswork. Describe the resource and terms that would need replacement.
Also study balance dynamics. Growing financing from a related party and an ordinary short payment deferral need different explanations. If a debt is regularly extended, its nominal maturity may poorly describe the economic duration of the relationship. This does not automatically change contractual classification, but it matters for access to cash and concentration of risk.
Use particular care when assessing prices. A difference from another transaction may reflect volume, quality, timing or a different bundle of obligations. Without aligning those conditions, the comparison proves neither benefit nor harm. State which parameters are known and do not turn limited public information into a conclusion about the participants’ good faith.