## AS 18 – Related Party Disclosures

### What is AS 18?

AS 18 prescribes the disclosure requirements for related party relationships and transactions so that users of financial statements can understand the effect those relationships might have had on reported financial position and results.

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### Types of Related Party Relationships

#### A. Control Relationships (AS 21 Context)

Enterprises that directly or indirectly control, are controlled by, or are under common control with the reporting enterprise.

This includes:

Holding company (parent)
Subsidiaries (>50% control)
Fellow subsidiaries (subsidiaries of the same parent)

Scenario	Result
A Ltd holds 75% of B Ltd	A & B are related (parent–subsidiary)
A Ltd holds 75% of B; B holds 60% of C	A, B & C are all related
A holds 75% of B; A holds 10% of C; B holds another chunk	B & C may be fellow subsidiaries – related

#### B. Associates and Joint Ventures (AS 23 Context)

An associate (significant influence, typically 20–50%) or joint venture of the reporting enterprise is a related party.

#### C. Individuals with Control or Significant Influence + Their Relatives

An individual who controls or significantly influences the enterprise, and their relatives, are related parties.

Relatives include: spouse, son, daughter, brother, sister, father, mother.
Example: Shubham holds 70% of Y Ltd → Shubham and his relatives are related to Y Ltd.

#### D. Key Managerial Personnel (KMP) + Their Relatives

KMP = persons having authority and responsibility for planning, directing, and controlling the activities of the enterprise.

Examples of KMP:

Managing Director
Whole-time Director
Manager
Any other person appointed by the Board

> Note: A non-executive director is NOT KMP.

The relatives of KMP (same list as above) are also related parties.

#### E. Cross-Enterprise KMP–Control Link

If a person controls one enterprise and is also the KMP of another enterprise, those two enterprises are related to each other.

Example: Shubham controls Infosys Ltd (70%) and is KMP of Reliance Ltd → Reliance Ltd and Infosys Ltd are related.

Worked example

### Example 1

Example (Fellow Subsidiaries): AK Ltd holds 75% in BB Ltd (subsidiary). BB Ltd holds 60% in CC Ltd (sub-subsidiary). Are BB Ltd and CC Ltd related?

Yes. Both are subsidiaries of AK Ltd (directly or indirectly) — they are fellow subsidiaries and hence related parties.

### Example 2

Example (Associate): AK Ltd holds 30% in ABC Ltd. ABC Ltd and AK Ltd — are they related?

Yes. ABC Ltd is an associate of AK Ltd (significant influence, 20–50%), making them related parties under AS 18.

### Example 3

Example (KMP–Control Link): Shubham is KMP of Reliance Ltd and also holds 70% in Infosys Ltd. Are Reliance Ltd and Infosys Ltd related?

Yes. Same person controls Infosys and is KMP of Reliance → the two companies are related under Type E.

⚠️ Common exam mistakes

Assuming non-executive directors are KMP — they are NOT.
Forgetting that fellow subsidiaries (common parent) are related parties, not just direct parent–subsidiary pairs.
Missing that relatives of KMP / controlling individuals are also related parties.

Bare-Act text Paragraphs 3–10 (Scope and Definitions) · AS 18 – Related Party Disclosures (ICAI) · click to expand

AS 18 applies to enterprises that directly or indirectly control or are controlled by, or are under common control with, the reporting enterprise; associates and joint ventures; individuals having control or significant influence; KMP of the enterprise; and cross-enterprise KMP–control situations.

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AS 18 – Related Party Disclosures: Introduction & Types of Relationships

Worked example

⚠️ Common exam mistakes