AASB 124 Related Party Disclosures –

entity management checklist

Background
AASB 124 Related Party Disclosures requires the disclosure of material related party relationships
and transactions. The objective of the standard is to ensure that the entity’s financial statements
contain disclosures necessary to draw attention to the possibility that its financial position and profit
or loss may have been affected by related party transactions and outstanding balances, including
commitments, with such parties.

The Australian Accounting Standards Board (AASB) extended the scope of AASB 124 to include
not-for-profit (NFP) entities, including all Victorian government departments, applicable from 1 July
2016 (i.e. for the 2016-17 reporting period).

Departments and agencies will be responsible for ensuring the completeness and accuracy of the
related party information disclosed in their financial statements according to the AASB 124
requirements.

Guidance
Given the sensitive nature of this information, and in the interest of maintaining privacy, a self-
declaration approach, whereby Key Management Personnel (KMP) self-declare all their related party
transactions, has been agreed with the Victorian Auditor-General’s Office (VAGO). A declaration
certificate has been developed for all KMP to provide the required information for the relevant
reporting period.

As departments and agencies will only receive disclosed transactions for the declaration certificate,
entities (management) will also need to perform reasonable additional and complementary
procedures to help assure themselves on the completeness of the related party information sourced
from KMP declarations as part of the related party disclosure note for completion of their financial
statements.

A checklist has been developed to support management’s assessment of the completeness of the
related party disclosures, and to ensure the following is achieved:
 Completeness of related party information
In order to ensure completeness of AASB 124 related party disclosures, entities (management)
should undertake transaction searches within their payroll and vendor systems to identify if
there are any related party transactions for each respective KMP.
 Accuracy of related party information
All public sector entities should verify the accuracy of the information reported by KMP in their
AASB 124 declaration certificates by confirming the details to their accounting records in their
financial systems and the terms and conditions of the relevant contracts. This may require them
to liaise with their procurement/contract management teams.
Entities should also refer to their own financial records and disclose any provisions for doubtful
debts or bad debts expense recognised in relation to outstanding balances declared by KMP.

Note that entities will be expected to refer any proposed disclosures, which are specific to individual
KMP, with the relevant KMP to ensure they have an opportunity to validate the proposed disclosure.

AASB 124 Related Party Disclosures – entity management checklist (Dec 2017) Page 1
Checklist to assist reporting entities with the completeness
review of their related party disclosures in their financial
reports

This checklist has been developed to support management’s assessment of the completeness of
the related party disclosure in their annual financial report.

Part A: Identifying KMP of the reporting entity

KMP are those people with the authority and responsibility for planning, directing and controlling the
activities of the entity, directly or indirectly i.e. those charged with decision-making responsibilities.
Note this excludes people who have been delegated authority to implement decisions at an
operational level.

KMP for the State

Cabinet is the principal decision making body of the government, therefore all Cabinet ministers will
be considered KMP of the State. All Cabinet ministers will also be considered related parties of the
State and all its controlled entities (i.e. departments and agencies). Refer to appendix A for a list of
all Cabinet ministers.

KMP for departments and agencies

Portfolio ministers are responsible for the oversight of their relevant portfolio departments and
entities, and will be considered KMP of their respective portfolio departments and entities. Note
that, all other Cabinet ministers and their related parties will be considered related parties of your
department or agency.

In addition, departments and agencies will need to assess who are the relevant executives that
meet the definition of a KMP and their respective related parties.

In general, members forming an entity’s governing board will typically be considered KMP of
the entity as they are considered as having the strategic decision making authority for the
planning, directing and controlling of the overall activities of the entity.

Executives or senior managers that have been delegated the operational authority for specific
functions of the entity would not be considered KMP for the purposes of AASB 124.

Frequency of data collection

As not all not-for-profit public sector entities within the State have 30 June year ends, i.e. TAFES
and schools have 31 December year ends, the State has to collect information from KMP more
frequently. Entities are encouraged to adopt a collection frequency that is appropriate for their
needs.

The first submission will cover the period 1 July 2017 to 31 December 2017. All KMP will be
expected to complete and submit their certificates by 29 January 2018.

A second submission will cover the remaining period 1 January 2018 to 30 June 2018 to report on
any additional transactions that may have occurred during the quarter. The previous certificate will

AASB 124 Related Party Disclosures – entity management checklist (Dec 2017) Page 2
be included to facilitate completion of the final submission for the 2016-17 financial year. All KMP
will be expected to complete and submit their certificates by 13 July 2018.

As the objective of the management checklist is to support management in the preparation and
completeness of their related party disclosures in the financial statements, management is strongly
encouraged to perform the checklist steps by the second data submission period for KMP
declaration certificates.

Entity name (e.g. Department of Treasury and Finance)

Reporting level (e.g. department or agency)

Period covered ☐ First submission ☐ Second submission

1 July 2017 – 31 Dec 2017 1 Jan 2018 – 30 June 2018
Due: Monday 29 January 2018 Due: Friday 13 July 2018

KMP of the entity List Portfolio minister(s)

List all relevant executives (some examples for departments include: Secretary, Deputy
Secretaries. Some examples for agencies include: governing board members, CEO)
Note: Preparers will need to apply judgement in determining who the relevant executives for
their respective entities are. Refer to appendix B for guidance on identifying KMP of your
reporting entity.

Part B: Steps to undertake for management’s assessment of

completeness
The proposed steps outlined below are designed to help support and validate the information
provided in the declaration certificate completed by each KMP. Preparers are advised to maintain
documents on file to support the work performed.

The checklist should be completed with reference to the additional information provided in the
appendices attached.

Steps to undertake Guidance

1. Undertake transactional searches within your This step is performed to ensure completeness and accuracy of
payroll and vendor systems for any known or the related party disclosure for the reporting period, by
identified related party transactions of the checking if there are any other transactions to be included in
entity’s KMP based on information obtained the KMP declaration checklist, and validating the information
from the following sources: that has been declared.
For ministers: Based on the information obtained from the sources listed on
 the ‘Register of members’ interests’ for the left hand side, identify any KMP related parties
Ministers maintained by the Parliament of (e.g. persons or companies).
Victoria, for all Cabinet ministers (refer to  Review the payroll system to identify if any of the identified
appendix A). related parties are in a senior appointment within the entity,
For KMP executives: to which related party transactions may exist.

 your entity’s ‘Declaration and management  Perform a search of the trade creditors / accounts payable
of private interest form’ for executive ledger to identify if there are any transactions with the
officers. identified related parties.

All KMP: Review of contracts and agreements

AASB 124 Related Party Disclosures – entity management checklist (Dec 2017) Page 3
Steps to undertake Guidance
 other information obtained based on  Liaise with your procurement/contract management team to
reasonable enquiries of relevant areas of sight the contract or agreement for the related party
the organisation to identify any other transaction identified in the vendor search above.
related parties of KMP (e.g. senior Determine the total contract value, and the terms and
management, contract/procurement team). conditions of the arrangement.
Validate the accuracy of the transactions  Based on discussions with your procurement/contract
declared in the KMP declaration certificates management team, determine if there are any other known
against the related party transactions identified related party contracts or agreements that your entity has
in your payroll and vendor system searches. entered into with any KMP.
If the probity review process of the contract procurement
identified any entity that is a related party of a KMP:
– use the information to conduct a search in your vendor
system to determine if any related party transactions
have occurred during the relevant reporting period; and
– assess if any additional searches may be required
(e.g. an ASIC search) to identify any other related party
information that may assist with your vendor review, as
these transactions may be required to be included in the
KMP declaration certificate.
1. As part of your assessment for the This step is performed to identify if there is any impairment of
provisioning of aged debtors, identify any outstanding balances associated with related party
impairment of amounts provided to related transactions.
parties that have been identified in the Provision for doubtful debts
transactional searches performed above.
 Review the provision for doubtful debts account to identify if
(Note this would be an exception rather there are any amounts related to any outstanding balances
than the norm as it would be rare for for related party transactions identified in the searches
amounts provided to related parties to performed above.

be impaired) Bad debts expense

 Review the bad or doubtful debts expenses recognised
during the period in respect of bad or doubtful debts due
from related parties identified in the searches performed
above.
1. Collate the information obtained from the This step is performed to prepare and finalise the related party
transactional searches performed and disclosure note in your financial statements.
determine the required disclosure. Collate the related party transactions identified in the searches
performed above and determine the required disclosure.
 Where transactions are of a similar nature, determine if they
can be disclosed in aggregate.
 Separate disclosure of a related party transaction may be
necessary to understand the effects of the transaction on
the financial statements of the entity.
Separate disclosure may be required for non-standard
transactions that are not at arms-length, under favourable
or negotiated terms or unusual (e.g. debt forgiveness,
guarantees or indemnities provided or received).
 For related party transactions of KMPs, ensure you have
shared the draft disclosure with the relevant KMP prior to
the finalisation of the note disclosure, to confirm the details
are correct.

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Appendix A – Cabinet ministers as at 1 July 2017
Information provided for Cabinet ministers is current as at 1 July 2017. Entities will need to refer to
the Parliament website to ensure ministers and their delegated portfolio information is current for
subsequent periods (http://www.parliament.vic.gov.au/members/ministers).

Entities will need to ensure the disclosure captures all ministers appointed during the period, including
any recent appointments and departures. In addition, entities will need to develop an equivalent listing
to capture all executive KMP appointments and departures during the reporting period.

Minister Portfolio
HON DANIEL ANDREWS Premier of Victoria

HON JAMES MERLINO Deputy Premier

Minister for Education
Minister for Emergency Services
MR TIM PALLAS Treasurer
Minister for Resources
HON GAVIN JENNINGS Special Minister of State

HON JACINTA ALLAN Minister for Public Transport

Minister for Major Projects
HON BEN CARROLL Minister for Industry and Employment
HON LILY D’AMBROSIO Minister for Energy, Environment and Climate Change
Minister for Suburban Development
HON LUKE DONNELLAN Minister for Roads and Road Safety
Minister for Ports
HON JOHN EREN Minister for Tourism and Major Events
Minister for Sport
Minister for Veterans
HON MARTIN FOLEY Minister for Housing Disability and Ageing
Minister for Mental Health
Minister for Equality
Minister for Creative Industries
HON JILL HENNESSY Minister for Health
Minister for Ambulance Services
HON NATALIE HUTCHINS Minister for Aboriginal Affairs
Minister for Industrial Relations
Minister for Women
Minister for Prevention of Family Violence
HON MARLENE KAIROUZ Minister for Consumer Affairs, Gaming and Liquor Regulation
Minister for Local Government
HON LISA NEVILLE Minister for Police
Minister for Water
HON MARTIN PAKULA Attorney General
Minister for Racing
HON ROBIN SCOTT Minister for Finance
Minister for Multicultural Affairs

AASB 124 Related Party Disclosures – entity management checklist (Dec 2017) Page 5
Minister Portfolio
HON RICHARD WYNNE Minister for Planning
HON PHILIP DALISAKIS Minister for Innovation and Digital Economy
Minister for Trade and Investment
Minister for Small Business
MS GAYLE TIERNEY Minister for Training Skills and International Education
Minister for Corrections
HON JENNY MIKAKOS Minister for Families and Children
Minister for Youth Affairs
Minister for Early Childhood Education
HON JAALA PULFORD Minister for Agriculture
Minister for Regional Development

Changes since 1 July 2017

Entities will need to ensure they monitor and include any changes that occur during the remaining
months of the reporting period.
MINISTER PORTFOLIO
The Hon. Fiona Richardson passed away on 23 August Minister for Women
2017. Her ministerial portfolios transferred to the Hon. Minister for Prevention of Family Violence
Natalie Hutchinson on 16 October 2017.
Former Minister Wade Noonan MP resigned on 10 Minister for Industry and Employment
October 2017 and was replaced by Minister Ben Carroll Minister for Resources
on 16 October 2017.

Register of Member’s Interests

http://www.parliament.vic.gov.au/publications/register-of-interests

Agency: Title of report: Date tabled: Files

Parliament of Register of Members' Interests - 2017/09/21 Summary of Returns June 2017
Victoria Summary of Returns — June 2017 and
and Summary of Variations notified
Summary of Variations notified between between 3 August 2017 and 20
3 August 2017 and 20 September 2017
September 2017 and Summary of
and Summary of Primary Return — 3 Primary Return June 2017
June 2017

Parliament of Register of Members' Interests - 2017/10/19

Legislative Council Cumulative
Victoria Cumulative Summary of Returns as at Summary of Returns as at 30
30 September 2017
September 2017
Parliament of Register of Members' Interest - — 2017/11/30
Summary of Primary Return
Victoria Summary of Primary Return — November 2017 and Summary of
November 2017 and Summary of
Variations notified between 22
Variations Notified between 22 September and 28 November 2017
September and 28 November 2017

AASB 124 Related Party Disclosures – entity management checklist (Dec 2017) Page 6
Appendix B – Fact sheet

Definition of Key Management Personnel (KMP)

KMP are those people with the authority and responsibility for planning, directing and controlling the
activities of the entity, directly or indirectly i.e. those charged with decision-making responsibilities.

KMP for the State

Cabinet is the principal decision making body of the government. All cabinet members will be
considered KMP of the State.

KMP for departments and agencies

Portfolio Ministers

Portfolio ministers are responsible for the oversight of their relevant portfolio departments and
entities. So, the Portfolio ministers will be considered KMP of their respective departments and
agencies.

Relevant executives of the entity

In general, members forming an entity’s governing board have the strategic decision-making
authority for the planning, directing and controlling of the overall activities of the entity. As a result,
members of the governing board will typically be considered KMP of the entity.

As a guide for departments, KMP may include members of the Senior Executive Group (i.e. the
Secretary and divisional Deputy Secretaries) as they are responsible for the delivery of the
department’s services, and have the authority and responsibility for planning, directing and
controlling the activities of the entity.

As a guide for agencies, KMP may include the Board of Directors and the executive management
team, as they are considered to be ultimately responsible for planning, directing and controlling the
activities of the entity. As the Board is the agency’s governing body, they are responsible for
ensuring the entity’s strategic objectives are achieved, whilst the executive management team, who
report to the Board, are responsible for the execution and authority of the day-to-day operations of
the entity.

For executives or senior managers that have been delegated the operational authority for specific
functions of the entity (i.e. Director of Human Resources or Assistant Director of Financial
Reporting), they will not be considered as KMP for the purposes of AASB 124.

Departments and agencies should exercise judgement to determine who will be considered a
KMP based on the specific facts and circumstances, particularly given officer titles at
departments and agencies can vary.

Attention should also be given to ‘de-facto’ decision makers. ‘De-facto’ decision makers are
persons that are not party of the governing board, but have the strategic decision making
authority. If such persons exist, they will be considered as KMP and should be disclosed in
accordance with AASB 124. It should be noted that while it is rare to have ‘de-facto’ decision

AASB 124 Related Party Disclosures – entity management checklist (Dec 2017) Page 7
makers in the public sector, departments and entities should undertake an assessment to
determine whether the ‘de-facto’ decision makers exist or not.

Definition of related parties

A related party is defined by the standard as a person or an entity that is related to the State
controlled reporting entity that is preparing its financial statements.

This includes:
 KMP of the reporting entity or of the State, or
 a close family member of the KMP, or
 the KMP’s or their close family member’s personal related entities (for example, companies,
partnerships, interest in joint ventures, etc).
Personal related entities include any entities that the KMP or their close family member:
 has significant influence of the entity; or
 the KMP or their close family member has control or joint control over the reporting entity.
Close family members are those family members who may be expected to influence, or be
influenced by, that person in their dealings with the entity and include:

(a) that person’s children and spouse or domestic partner;

(b) children of that person’s spouse or domestic partner; and

(c) dependents of that person or that person’s spouse or domestic partner.

‘Children’ include step, adoptive, dependent, non-dependent, adult children and children not living
at home (unless they are estranged).

‘Spouse’ or ‘domestic partner’ includes married, de facto, civil union partnerships, but excludes
separated or divorced spouses or partners.

Dependents are any family members who are financially supported by KMP, KMP’s spouse or
domestic partner and may include siblings, parents, elderly dependents, such as grandparents, or
disabled family members.

It should be noted that while the definition of close family members does not specifically
include siblings, parents and other extended family, it is expected that transactions with
other family members outside the immediate family that the KMP is aware of are also taken
into consideration for declaration on a case-by-case basis if the relationship can be
reasonably expected to influence, or be influenced by the KMP dealing with the entity. This
may include cousins, siblings and any other members of their extended family. This will be a
matter of judgement by respective parties.

Significant influence is having the power to participate in or ability to affect the financial and
operating policy decisions of the KMP.

Control is defined as the power to govern the financial and operating policies of an entity so as to
obtain benefits from its activities. Joint control is the contractually agreed sharing of control over
an economic activity. An entity controlled or jointly controlled by KMP and KMP’s close family
members means that KMP and/or any close family members have the ability or power to direct an
entity’s relevant activities that can significantly affect its returns, and have rights or exposure to the
financial and non-financial returns of the entity.

Types of entities include companies, partnerships, sole traders and trusts.

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AASB 124 Related Party Disclosures – entity management checklist (Dec 2017) Page 9
Related parties for public sector entities
As all Cabinet ministers are considered KMP of the State, they are also related parties of the State
and all its controlled entities (i.e. departments and agencies).
Assessment will need to be performed at the department and agency level to determine the related
parties of executives who are KMP of the entity.

What is a related party transaction

Under AASB 124, a related party transaction is any transfer of resources, services or obligations
between a reporting entity and a related party, regardless of whether a price is charged.
Examples of related party relationships include the following:

Related party relationships under AASB 124 include:

 Close family members employed in a senior position by the Victorian Government. A senior position is a
position that has decision making responsibility of a KMP.
 Any transactions by the KMP, close family members or a related entity that comprise of a contract or
agreement with an entity that you are a KMP of, or any entity controlled by the entity that you are a KMP
of.
Cabinet Minister’s wife is the Secretary of a department Deputy Secretary’s son owns a company that has a
contract to provide web design services to his
department.
Portfolio Minister’s daughter-in-law is a board member of Board member jointly owns a company that has made a
a PNFC entity within his portfolio. significant acquisition of a block of land from the public
sector agency he is a board member of.

Examples of related party transactions include the following:

Related party transactions under AASB 124:

 Any transactions by the KMP, close family members or related entity that comprise of a non-standard
contract or agreement with the entity that you are a KMP of, or any entity controlled by the entity that you
are a KMP of.
Loans to/from the entity that you are a KMP of, or any Equity contribution from an entity that you are a KMP of,
entity controlled by the entity that you are a KMP of. or any entity controlled by the entity that you are a KMP
of, to a related party entity.
Debts forgiven or partially forgiven by the entity that you Collateral, indemnity or guarantee received from/given to
are a KMP of, or any entity controlled by the entity that the entity that you are a KMP of, or any entity controlled
you are a KMP of. by the entity that you are a KMP of.
Settlement of liabilities on behalf of you, your close family Receipt/payment of ex-gratia payments or receipt of
members or entities controlled or jointly controlled by you grants or subsidies greater than $5 000 (individually)
and your close family members, by the entity that you are from/to the entity that you are a KMP of, or any entity
a KMP of, or any entity controlled by the entity that you controlled by the entity that you are a KMP of.
are a KMP of.
Receipt of dividend income from, or payment of dividends Receipt/recognition of entitlement of interest income from
to, an entity that you are a KMP of, or any entity or incurrence of interest expense to the entity that you
controlled by the entity that you are a KMP of. are a KMP of, or any entity controlled by the entity that
you are a KMP of.
Lease of an asset to/from an entity that you are a KMP Provision/purchase of goods/services to/from the entity
of, or any entity controlled by the entity that you are a that you are a KMP of, or any entity controlled by the
KMP of. entity that you are a KMP of.
Purchase or sale of non-financial assets from/to an entity Commitment to execute a transaction contingent upon
that you are a KMP of, or any entity controlled by the whether an event occurs or does not occur in the future
entity that you are a KMP of e.g. land, buildings, with the entity that you are a KMP of, or any entity
intangibles. controlled by the entity that you are a KMP of.

AASB 124 Related Party Disclosures – entity management checklist (Dec 2017) Page 10
Transactions not required to be disclosed
Typical citizen transactions are not required to be disclosed. These transactions are where
KMP or a KMP’s close family member interacts with a government entity in the capacity as a
citizen. Some Commonwealth examples include paying personal tax or receiving tax refunds,
receiving a social welfare benefit, receiving public health services, receiving education or student
allowances, purchasing government bonds directly from the market, and obtaining a Medicare
rebate when visiting the GP. Some State examples include land tax, stamp duty, council rates and
parking fines.

Disclosure threshold
Provision/purchase of goods and services with entities controlled by the State of Victoria means
there will be a business agreement between (a) the KMP or their related party, and (b) the entity.

Assets include plant, equipment, land, buildings or businesses. It also includes intangible assets
like rights, quotas, and research and development.
For transactions or contracts on standard terms and conditions of the State, KMP may apply a
threshold of $100 000 to exclude declaring those transactions less than the threshold. However,
KMP may choose to declare all transactions. For all other transactions or contracts, KMP are
required to declare all transactions, regardless of the financial amount.

For example, where the entity has a standard contract with a KMP’s related party to provide IT
equipment for a total value of $60 000 over 3 years, the contract is below the $100 000 threshold.
The KMP may elect to not declare the transaction. However, if the contract is to provide services for
a total value of $150 000 over 3 years, the contract amount is above the $100 000 threshold. The
transaction must be declared even though the service amount each year of $50 000 is below the
$100 000 threshold.

An example of a contract or agreement that is not on standard terms and conditions of the State is
where the entity has a contract with a KMP’s related party to provide web design services for a total
value of $25 000 over 2 years. The negotiations with the KMP’s related party has resulted in an
upfront prepayment of the contract in one lump sum prior to any services being rendered, which is
not consistent with current procurement terms of the State. As a result, the related party contract
would need to be declared regardless of its total value.

Declarations of interest
As part of management’s assessment of completeness, preparers are strongly encouraged to
perform transactional searches for any other known related party transactions of their KMP. Entities
can identify other related parties of the KMP from the declaration of personal interest forms that
ministers and executives are required to complete annually.

Portfolio ministers

Members of the Victorian Parliament, must declare their personal interests under the Members of
Parliament (Register of Interests) Act 1978. These declarations form a register of members’
interest. A cumulative summary of the register is publicly available each September on the
Parliament of Victoria website ( http://www.parliament.vic.gov.au/publications/register-of-interests).

AASB 124 Related Party Disclosures – entity management checklist (Dec 2017) Page 11
Executives

In accordance with the Public Administration Act 2004 and the Code of Conduct for Victorian Public
Sector Employees 2015, all executive officers (including public entity board appointees) are
required to complete the entity’s Declaration and management of private interest form upon
appointment, annually after appointment and within five working days after the employee’s
circumstances change. Entities will need to liaise with their Human Resources Shared Services
team (or departmental equivalent) to access these forms.

Preparation of related party disclosure note

Accessibility of KMP declaration certificates

The information collected (declared) will enable departments and agencies to review the information
received from their respective KMP to support drafting of the related party disclosures for the
inclusion in the relevant departments and agencies related party note.

For 2016-17 the Department of Treasury and Finance (DTF) team will provide an overview and
support role in facilitating the completion of the related party disclosures and ensuring consistency
across the board.

Ministers

Cabinet ministers will return their certificates to the Department of Premier and Cabinet (DPC) via
the individual department’s cabinet submissions team for referral to DTF.

Where related party transactions have been declared in the certificate, DTF will provide the required
information to the relevant portfolio departments and agencies. Note that preparers will need to
provide a draft of any proposed related party disclosures to their portfolio minister(s) for
approval, prior to finalising the note in their financial statements.

Due to the sensitive nature of the data collected, all information collected from ministers should be
stored in a secure manner. In most instances, we expect the information received from KMP will be
de-identified as it will most likely be disclosed in aggregate, unless required to be disclosed
separately and collated with other data for inclusion in relevant public sector entities’ financial
statements, and tabled in Parliament.

Executives

Reporting entities will need to develop a similar internal process to co-ordinate the collection of
executive KMP declaration certificates. The process will need to ensure that privacy is maintained
and all documents are securely stored.

Materiality threshold

The accounting standards only require the disclosure of material related party transactions and
outstanding balances. Materiality is subject to professional judgement and goes beyond the dollar
value of the transaction or balance, as it could influence the economic decisions that users make.

However, it is important to note that all KMP should declare all relevant related party transactions,
noting that typical citizen transactions are not required to be declared. A threshold of $100  000 may
be applied for standard commercial related party contracts in an effort to ease the reporting burden
on KMP. This is because a transaction that may appear immaterial on its own, may in combination
with other like transactions have a material effect on the State’s, department’s or agency’s financial
statements and warrants disclosure.

AASB 124 Related Party Disclosures – entity management checklist (Dec 2017) Page 12
Items of a similar nature may be disclosed in aggregate except where separate disclosure is
necessary for an understanding of the effects of related party transactions on the financial
statements of the department or entity. Disclosures that related party transactions were made on
terms equivalent to those that prevail in arm’s length transactions are made only if such terms can
be substantiated.

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