Can the related party transactions be avoided? What purpose disclosure achieves?
When our college principal, Dr. K. G, mentioned that his son was studying at an autonomous college in the city, I asked why he hadn't enrolled him in our college. He explained that his son had always scored high marks, and if he continued to do so at our college, people might suspect it was due to his father's influence. To avoid such gossip and ensure fairness, he chose a different college for his son, thus avoiding any conflict of interest and maintaining integrity in the education system. This was a common practice in our times.
Can a corporation avoid such conflicts of interest? No. Related parties like associates, subsidiaries, and SPVs exist to benefit the group and provide strategic support in business in India and outside. This means financial statements may be questioned for reliability. To improve reliability, it was suggested to disclose relationships and related party transactions.
The goal of improving financial statement reliability is to disclose these relationships and transactions.
By CA L.Muralidharan and CPA L.Mukundan
Visit www.sreeramcoachingpoint.com for more blogs
Contact: 6383228202 or 9884439769
Also use our app Gyanji for more utility and benefits
